Seniors should be aware of frequent areas of financial abuse and scams:
Trust Mills offer low-cost living trust “packages” to seniors. They are commission-based products that can include annuities and other risky investments. The packages are usually a “one-size-fits-all” trust form for a flat fee (e.g., $699, $399).
Why it doesn’t work.
Seniors should choose their agents carefully since there are powers that can be misused. Make sure to limit the agent’s power, or find other ways to protect yourself from unauthorized use. Your attorney-in-fact can make gifts on your behalf, but is subject to guidelines that you set in your power of attorney. Court supervision (conservatorship) may be needed in high-risk situations.
An annuity is a product sold by a financial institution that is designed to invest and grow an individual’s savings. It then pays out a regular stream of payments to the individual in later years. Annuities are primarily used as a means of securing a steady cash flow after retirement.
Careful! If the senior needs the funds (such as to pay for in-home assistance or long term care), a severe penalty (8% or more) may be charged. Various hooks or scams have been developed that prey on the fears of seniors. Seniors are often told that annuities will help them qualify for MediCal or VA benefits, which is usually untrue.
Read more about annuities here or visit CANHR to watch videos about annuities.
Any insurance coverage that provides nursing-home care, home-health care, personal care, or adult day care for individuals is called Long Term Care (LTC) insurance. LTC insurance offers more flexibility and options than many public assistance programs. If the person’s assets are less than $500,000, then LTC insurance may be too expensive. In that case, it would be better to plan for family care and MediCal eligibility. Visit CA Partnership for LTC to learn more.
A reverse mortgage is a type of mortgage where a homeowner can borrow money against the value of his or her home in exchange for agreeing to give up the home to the lender at a future date. No repayment of the mortgage is required until the borrower dies or the home is sold.
Downfalls. They are very profitable for financial institutions due to high costs and fees. However, reverse mortgages may require the sale of property sooner than anticipated. See the Department of Real Estate for more information, and the Bureau of Real Estate for consumer alerts.