A scam common in many parts of the country has come to central North Carolina. Veterans (and widows of veterans) are being duped into funneling hundreds of thousands of dollars into totally inappropriate (even disastrous) annuities. The come on? “I can qualify Mom for another $1,056 a month in veterans benefits and you’ll be able to afford the assisted living facility.”

Often a seminar is hosted by an assisted living facility and led by a “veterans’ benefits specialist” who is nothing more than annuity salesman (and usually from out of town). Sometimes the family of someone recently admitted to a facility will receive a telephone call with the enticement of another $1,056 or more monthly.

Some of the folks I have spoken to tell me that the annuities being offered have 10 or more years of substantial surrender charges. Often the sales people (er . . . “specialists”) are quite aggressive (understandable given the HUGE commissions they make).

A Few Plain Facts About Veterans Benefits

• Veterans benefits impose NO transfer penalties like Medicaid does.
• A veteran must not have assets in excess of certain levels.
• A veteran can actually transfer the excess assets to another person and instantly qualify for benefits.
  • Transferring to another person might not be too smart, though.
  • What if that person dies, divorces, gets sued, goes bankrupt?
  • What if the veteran later needs Medicaid (which DOES impose transfer sanctions)?
• There are a number of different strategies involving how assets are titled, or perhaps the use of a trust, that do NOT involve an inappropriate annuity!

The worst cases involve the veteran (or widow) being counseled to transfer most of his or her money to a child (at this point the veteran is qualified for benefits, but he or she won’t be told that) and THEN having the child purchase the “special” annuity. Buried in the fine print, the annuity will have huge surrender charges for many years.

I have nothing against appropriate use of annuities. I have everything against the use of a totally unnecessary annuity that will tie up a great deal of a veteran’s money (nearly all, in fact) for many years, and pay an annuity sales person tens of thousands of dollars in commissions.

I am also bothered by assisted living facilities that host these seminars and give sales people access to their residents. I hope that the involvement of the assisted living facility is simply misguided, but well-meaning. In any event, there are plenty of knowledgeable sources who would be happy to present at a facility without trying to steer the attendees into an expensive and unnecessary annuity.

AARP has an excellent article on this. I don’t always agree with “Everything AARP,” but I agree with almost everything they have written regarding veterans annuity scams in assisted living facilities. I take some exception to the article’s condemnation of trusts, because the use of a trust might be totally appropriate. Their point about a trust causing potential Medicaid problems is very well taken, however. The important take away is to make sure that anyone recommending and preparing a trust understands the complex trust rules of BOTH the VA and Medicaid.

Again, I have nothing against wise use of annuities. If you are thinking of buying one, buy from someone locally who you know and trust. You’ll know where to find them if things go wrong. Meanwhile, the presenter who sells the annuities as part of the traveling road show will be back in Vegas!