Annuities Are Not A
One-Size-Fits-All
Investment Strategy
Several recent horror
stories I’ve heard from
clients compel me to re-
visit a topic I’ve addressed
before. From what I hear,
my advice is still very
necessary, and the public
needs to hear it again.
Annuities continue to
be indiscriminately pro-
moted as a one-size-fits- Joseph S. Karp,
all strategy for achieving C.E.L.A.
Medicaid eligibility. Yes, of course
there is some synergy between legal
planning and financial planning.
Sometimes, a certain type of annuity
can be a part of the Medicaid plan-
ning process. But when they are used
indiscriminately, the line between
financial planning and legal planning
gets blurred. Much too blurred for
your family’s financial and legal
# #
health.
Listen to Joe Karp with
Anita Finley on Saturday,
June 27 from 7:30-8:00 AM
on WSBR 740AM and on the
# #
Internet at www.wsbrradio.com.
Annuities are NOT right for every-
one. On the surface, their logic is
appealing: Assets are taken out of
the hands of the Medicaid applicant
and spouse, and turned into an income
stream. Voila—instant Medicaid
eligibility, right?
Wrong! Purchasing an annuity has
the potential to create some nasty
ripple effects. You and your legal
advisor must look at the totality
of your family’s specific situation
before leaping in. What are the impli-
cations under the lookback rules?
What are the tax ramifications, not
only now but in the future? What are
the penalties if the family requires the
cash? Without the proper analysis,
purchasing an annuity can easily
create more problems than it solves.
Let me use an analogy: Suppose
you’ve got stomach pains. You don’t
see a board-certified gastroenterolo-
gist, but instead stop in to your local
drugstore to talk with the pharmacist.
He suggests an over-the-counter
remedy that works for some people’s
stomach aches. You don’t know if it
will cure your problem—in fact, you
still don’t know what your problem
really is. And you don’t
know if you’re allergic to
the drug, either. But you
take it. In the end, you could
end up far sicker than you
were to begin with!
The practitioners of the
rush to annuities are capi-
talizing on an aging public
that is increasingly fearful
of the crushing costs of
lon g - ter m c a r e. Th o se
pushing annuities often claim that they
have input and supervision from an
attorney. But is the attorney advising
them a Florida Board Certified Elder
Law Attorney? Who is the attorney
really working for and advising? Is
the attorney’s function to help you,
the client—or is the attorney’s func-
tion to assist the annuity salesperson?
Is the attorney discussing directly
with you all the potential options that
you have, not just an annuity? Is
the attorney advising you of any
negatives that may be associated with
purchasing an annuity?
Generally, people fall prey to these
tactics because the fee being charged
is significantly less than that which
would be charged, by a Florida Board
Certified Elder Law Attorney. Their
services may indeed be cheaper:
They can afford to charge less because
they are also receiving income from
the commissions on annuities. The
public doesn’t realize that the initial
fee may be less, but in the end, the
true cost may be much greater.
To protect the public, the Florida
Bar Elder Law Section has established
a new committee on financial prod-
ucts. I have been asked and agreed
to chair that committee. We’ll be
examining how financial products are
being used and abused in relation to
the practice of elder law. I’ll report
back to you as I glean more informa-
tion. Until then, caveat emptor!
Joseph S. Karp is a nationally certified
and Florida Bar-certified elder law attorney
(C.E.L.A.) specializing in the practice of Trusts,
Estates and Elder Law. His offices are locat-
ed at 2500 Quantum Lakes Drive, Boynton
Beach; 2875 PGA Blvd., Palm Beach Gar-
dens; and 1100 SW St. Lucie W. Blvd., Port
St. Lucie. Call him at 561-752-4550 (Boyn-
ton); 561-625-1100 (Palm Beach Gardens);
or 772-343-8411 (Port St. Lucie). Toll-free
from anywhere: 800-893-9911. E-mail: KLF@
Karplaw.com or website www.karplaw.com