California elder financial abuse rules
There are various types of activities characterized as elder financial abuse, and this is part of the great strength of the California law because the law provides for a really broad scope of activities, according to Dorit. He explained:
The requirement under the law says that if there is any conduct in which an elder or dependent’s property, money or assets have been harmed or are likely to be harmed by somebody, then they potentially have a claim under the California Elder Financial Abuse rules.It generally happens with people in the financial or insurance industry. So, for example, if you have an elder person with cash and they’re told to make very risky investments in real estate, stocks, investments in speculative limited partnerships and things of that nature, which would be inappropriate for that elder or adult dependent, then the victim may have a claim.
Long list of perpetrators
The kind of actors that Dorit sees getting involved in this area are financial advisors, insurance agents, life insurance agents, annuity insurance agents, stock brokers, bankers – and in many cases – trustees. He explained:
If there is a trust for an elder and money is to be spent conservatively, but the trustee either takes the money or does inappropriate things with it, then he or she could be liable. In some cases, unfortunately, it can even be a family member who abuses the elder.Generally we look to have these cases against people who are in some kind of professional or commercial capacity who are taking advantage of an elder by virtue of what they’re essentially pawning off as some kind of expertise – when in fact, all they’re really doing is collecting fees at the expense of an elderly person.
Annuities: A particular concern
Annuities are a particular concern when it comes to elder financial abuse, according to Dorit. He defines annuities as essentially insurance contracts where you pay a certain lump sum of money, and in exchange for that, you’re told that you will get back some payment of money at some point in the future. It can be a periodic payment that you could get paid monthly – which is an immediate annuity, or it can be an annuity where you pay $10,000 today and you’re promised $25,000 in 15 years. That’s a deferred annuity. He provided the following example:
We just had a case last week involving an 86 year old woman who was sold a 10 or 15 year annuity. She was already living in low-income housing and barely making ends meet. What little money she had at the age of 86 was virtually taken from her and put into an annuity which would end up not paying her until she was at least 96 years old.Obviously, that’s a horrible thing for her because she has monthly expenses and she needs money for a rainy day. Nobody would reasonably sell an 86 year old woman a 10 or a 15 year annuity because their life expectancy is far, far shorter than that.
So, the only person who really makes a profit on that transaction is the annuity agent. What they do is sell it, take their fee and then walk away. They've left an elderly person with their hands tied behind their back financially with little or no expectation that they’re ever going to get any of that money back.
He says that people who are living under any kind of financial distress who need a nest egg or a safety net in life and have all their money put into an investment where they can’t get at it or the money’s going to be paid in very small amounts or far into the future are likely to be harmed – and that’s what the law covers.
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