December 31, 2005 |
Avoid Living Trust Scams
March 13, 2006
Ask the AG:
Consumer Protection Tips from Attorney General Rob McKenna
Some Living Trust Sellers Aren't Trustworthy
Consumer: I'm exploring estate planning options. I've heard that a living trust can save me money. But I've also read warnings about living trust scams. Can you shed some light on this?
Attorney General Rob McKenna: In the past, people wrote a will to help ensure their survivors' financial well-being. Today, consumers can choose from a wide range of estate planning options. Confusion about these options, concerns about estate taxes and the complexity of probate provide the perfect cover for cons to prey on individuals' anxieties about the future.
In the past several years, the Attorney General's Office has seen an increase in unscrupulous businesses aggressively promoting living trusts to senior citizens who may not need them.
A revocable living trust - not to be confused with a living will - allows a person to control distribution of his or her estate by transferring ownership of property and assets into a trust. Properly drafted and executed, a living trust can avoid probate, the court-supervised process by which property is transferred to your heirs. Joint ownership of assets is another way to avoid probate.
A living trust can offer other advantages, but isn't a one-size-fits-all solution. For example, individuals with small estates may avoid probate without a living trust.
Deceptive organizations typically advertise seminars on estate planning where they tell horror stories about the probate process then make appointments for in-home visits. Such salespeople frequently exaggerate the benefits of a living trust and encourage consumers to act quickly. They exploit seniors' fears that their estates could be eaten up by probate costs or distribution of their assets could be delayed for years.
Some businesses advertise do-it-yourself living trust products. Others use estate planning services to gain access to consumer's financial information in order to sell additional products. Our office has received complaints about living trust sellers promoting reverse mortgages to seniors in order to tap into their home equity. Their intent is to sell high-commission insurance annuities and other investments that benefit the salesperson, not the consumer.
Living trusts sold this way can present many other problems. The documents may not be prepared by lawyers or meet legal requirements. They may be generic documents that don't meet an individual's needs. Washington's probate laws are streamlined compared to most states, so a living trust may not necessarily save money. Lastly, the information may not include instructions on how to make the trust effective.
Before you sign any papers to create a will, a living trust, or any other kind of trust, you should:
Additional information about living trusts, wills and probate is available from the Attorney General's Office at www.atg.wa.gov, the AARP at www.aarp.org, the Washington Bar Association at www.wsba.org, the Federal Trade Commission at www.ftc.gov and www.washingtonlawhelp.org.
Ask the AG:
Consumer Protection Tips from Attorney General Rob McKenna
Some Living Trust Sellers Aren't Trustworthy
Consumer: I'm exploring estate planning options. I've heard that a living trust can save me money. But I've also read warnings about living trust scams. Can you shed some light on this?
Attorney General Rob McKenna: In the past, people wrote a will to help ensure their survivors' financial well-being. Today, consumers can choose from a wide range of estate planning options. Confusion about these options, concerns about estate taxes and the complexity of probate provide the perfect cover for cons to prey on individuals' anxieties about the future.
In the past several years, the Attorney General's Office has seen an increase in unscrupulous businesses aggressively promoting living trusts to senior citizens who may not need them.
A revocable living trust - not to be confused with a living will - allows a person to control distribution of his or her estate by transferring ownership of property and assets into a trust. Properly drafted and executed, a living trust can avoid probate, the court-supervised process by which property is transferred to your heirs. Joint ownership of assets is another way to avoid probate.
A living trust can offer other advantages, but isn't a one-size-fits-all solution. For example, individuals with small estates may avoid probate without a living trust.
Deceptive organizations typically advertise seminars on estate planning where they tell horror stories about the probate process then make appointments for in-home visits. Such salespeople frequently exaggerate the benefits of a living trust and encourage consumers to act quickly. They exploit seniors' fears that their estates could be eaten up by probate costs or distribution of their assets could be delayed for years.
Some businesses advertise do-it-yourself living trust products. Others use estate planning services to gain access to consumer's financial information in order to sell additional products. Our office has received complaints about living trust sellers promoting reverse mortgages to seniors in order to tap into their home equity. Their intent is to sell high-commission insurance annuities and other investments that benefit the salesperson, not the consumer.
Living trusts sold this way can present many other problems. The documents may not be prepared by lawyers or meet legal requirements. They may be generic documents that don't meet an individual's needs. Washington's probate laws are streamlined compared to most states, so a living trust may not necessarily save money. Lastly, the information may not include instructions on how to make the trust effective.
Before you sign any papers to create a will, a living trust, or any other kind of trust, you should:
- Consult with a Washington-licensed estate planning attorney or financial advisor, preferably one who has been recommended to you by a trusted friend or family member. Or contact your local bar association's lawyer referral service.
- Check credentials. Research any organization that wants your business with the Better Business Bureau. However, there may be no record of complaints if an organization is new or has changed its name.
- In addition, inquire whether the person offering the living trust is an insurance agent. The Insurance Commissioner has said that selling living trusts is not an acceptable method to obtain leads for insurance sales.
- Avoid salespeople who give the impression that AARP is selling or endorsing their products. AARP does not endorse any living trust product.
- Be cautious of anyone who claims that everybody should have a living trust or presents the living trust as a sure-fire method to avoid taxes.
- Beware of high-pressure sales tactics. Take time to consider your options.
- Compare prices. Unlicensed sellers often claim their prices are lower than a lawyer but charge as much or more than qualified attorneys.
- If you decide to obtain a living trust make sure it is properly funded - that is, that the property has been transferred from your name to the trust. An unfunded living trust is nothing more than an expensive stack of paper.
- If you purchase a living trust during a home visit or seminar away from the seller's usual place of business, you can cancel the purchase within three business days.
Additional information about living trusts, wills and probate is available from the Attorney General's Office at www.atg.wa.gov, the AARP at www.aarp.org, the Washington Bar Association at www.wsba.org, the Federal Trade Commission at www.ftc.gov and www.washingtonlawhelp.org.