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How to spot fraudulent annuities and living trusts

On Behalf of | Sep 6, 2023 | Estate Planning

As elders become more interested in estate planning solutions for their assets, they become more vulnerable targets for annuity and living trust scams. An annuity is an agreement between a consumer and an insurance provider that involves multiple payments as investments leading up to a substantial payout in the future. Meanwhile, living trusts allow an individual to transfer assets into a trust with the goal of distribution to their designated beneficiaries after passing on.

These options can help you plan how to distribute assets to heirs. Unfortunately, some might sell these to victimize buyers and scam significant amounts out of them. Also, elders could be ideal victims because of their trusting nature and potential health issues affecting their abilities to thoroughly assess risky deals. If you are a potential victim or an elder’s family member, you should take extra precautions against these schemes.

Qualities of annuity scams

It is easy to spot annuity scams by looking out for the following red flags:

  • It takes up over 35% of the buyer’s assets.
  • The penalty for early cash-outs is unreasonably high.
  • The salesperson encouraged this option to an elder unlikely to live until the indicated collection date.
  • The elder feels extreme pressure to purchase more annuities from the same salesperson.

It is best to avoid purchasing after spotting these signs.

Qualities of living trust scams

The following could be warning signs that a living trust is fraudulent:

  • The document looks illegitimate or drafted poorly.
  • The person who prepared the document is not an attorney or licensed estate planning specialist.
  • There was no consultation with a legal professional before receiving the trust agreement.
  • The process of the trust provider is vague and confusing.
  • The salesperson used seminars or free lunches to incentivize the buyer’s purchase.

Living trusts usually require customization and legal know-how to fit an individual’s needs. If it lacks thoroughness and proper procedures, it might be a scam.

Reporting fraudulent annuities and living trusts

Spotting these scams is just the first step. Afterward, you should report their unlawful activities to the authorities. Additionally, you can protect yourself from these schemes by seeking financial and estate planning services from legitimate providers only, such as attorneys or licensed advisers.