​The ugly return of the 'Xerox annuity'

That technique, as I told the reporter, is not uncommon. I explained that using Medicaid compliant annuities as a way to convert liquid retirement funds into a pension-style income stream to the healthy spouse was a common and legal planning technique. 

But Palasini was not licensed to sell an annuity. Instead she was photocopying someone else’s annuity contract and giving it to the client in exchange for the cash. Use of this despicable procedure in the past by scam artists had been labeled as a “Xerox annuity” – a term I’m sure the folks at Xerox aren’t crazy about.

It earned that name because insurance agents or non-agents wanting to dupe people would use photocopied contracts and change the name of the owner and the amount to make it appear the client was sold a valid contract, while secretly pocketing the client’s cash. In the latest and ugliest occurrence of the Xerox annuity, Palasini was convicted of pocketing the cash and has allegedly continued to do the same thing in numerous cases. According to the reporter, Palasini was having retirement accounts wired directly into her company’s bank account. I was asked whether wire transfers are common or not, to which I replied that they were, but I explained that it was not the kind allegedly done by Palasini. In fact, in Medicaid planning, it’s very common to have funds wired from one company to another because of the cost of delay if funds are not moved in a timely manner. 

But I explained that the legitimate process involves wiring money from the current retirement account directly to the insurance company’s account to fund the annuity. Failure to do so properly could have disastrous effects on the client if the source funds are qualified or tax-deferred and are not transferred to an annuity account with a similar tax status. 

As I was interviewed, I also posited some recommendations for the public to follow, which I will repeat and expound on here for everyone’s benefit: 

When doing Medicaid planning, deal with a certified professional. If a consumer is attempting to qualify for long-term care, Medicaid, or VA pension benefits, seek the advice of a Certified Medicaid Planner™ or an accredited VA claims agent. Some designations or certifications used by planners can be confusing, misleading or not worth anything because they have no backing. The designation of a planner should be backed up by experience, education, examination, and ethics requirements. Only six financial designations have national accreditation, according to the FINRA website. Any planner who provides services in the long-term care market should seriously consider getting this certification. 

Medicaid planners come from a variety of backgrounds because of the overlap between legal, financial and geriatric care/social worker professionals involved in the long-term care Medicaid planning process. Not every profession has its own disciplinary policy or ethical standards. 

Most Medicaid planners and benefit advisors are good, solid professionals who diligently help their clients. Insurance and annuity products are used regularly to help with meeting Medicaid and/or VA planning objectives. If a person is purchasing an insurance or annuity product, they should only do so from an insurance agent licensed to sell the product. Consumers can check the state insurance commissioners’ websites to confirm whether a person is licensed or not. Additionally, if a person is making out a check to fund an insurance product, the check should be made payable to the insurance company. Similarly, if money is being wired to fund the product, the wire instructions should direct the funds straight to the insurance company’s account. 

And finally, if a consumer receives a contract that they suspect might be a “Xerox annuity,” they should contact the authorities. Palasini lost her license to sell annuities nearly eight years ago, but that did not seem to stop her from wreaking havoc in many lives and communities. Only when enough people started to complain were the authorities finally alerted to bring her to justice.