Senior Financial Exploitation: Living Trust Scams

It’s a common idea that probate should be avoided at all costs. And that a revocable living trust is the way to get around probate. Some people are packaging these ideas and marketing them.

You might receive an invitation to a free seminar, or an event at a local home, where a living trust is being sold. Before buying in, it’s best to seek an attorney’s opinion on whether it really makes sense for you.

First, What Is a Trust?

It’s a written legal instrument. It handles your assets instead of letting the probate court do that after your death. While you are living, you transfer property into the name of the trust. If you’re transferring real estate, you’ll create a new deed to transfer the property into the trust. The trust needs bank accounts under its own name.

Generally speaking, you keep control over the assets placed in the trust. When you pass away, your assets will go to the beneficiaries you named in your trust, according to the terms it lays out.

You or someone you designate oversees the trust. A revocable trust can be changed or terminated at any time while its creator is living.

Life estate deed or living trust: which is best for an older adult’s home?

What the Scammers Tell Seniors

Older adults sometimes think they might need a trust to put their affairs in order. Living trust marketers tap into that concern.

These marketers often tell seniors that avoiding probate will save them from high court fees and save their heirs from stress and delays.

The promoters might insinuate that a living trust can shield assets against assisted living companies and other creditors. They might promote revocable living trusts by saying they’re tax-advantaged, or that they ensure an elder’s estate plan won’t be challenged. But a will can be an effective tax-saving instrument. As for saving money on probate court fees, a revocable trust will bring fees of its own. You’ll pay for the drafting work, possible fees for the transfer of assets into the trust, and ongoing administration and accountants’ fees.

What the Scammers Won’t Tell Seniors

Here’s what they don’t say:

• Trusts are expensive to maintain.

• Trusts require annual tax filings.

• Trusts involve time and paperwork for the beneficiaries, just as probate does.

Because of these factors, trusts are typically used by people with a lot of assets, possibly held in more than one place, or for other special circumstances. Lawyers, financial advisers, and accountants generally weigh in when a person or family establishes a trust. These professionals guide their clients around potential pitfalls. They know if a trust is the best choice, which kind of trust would be optimal, and how to tailor it to the household and the circumstances.

What a Living Trust Scam Could Look Like

Here are some clues that a living trust package (or “kit”) could be a scam:

• You get an unsolicited visit from a salesperson. Seniors are often the target audience. The salesperson may have a fancy credential like Registered Financial Gerontologist.

• The promoter urges the potential customer to decide quickly.

• The marketers have the only estate planning document you need, or the one professionals “don’t want you to know about.”

• The company selling the product uses generalized, pre-filled forms. Perhaps the package is very cheap (less than $1,000).

• The package is promoted at a “free lunch” seminar. Or maybe it’s set up at a person’s home. Note: If you buy a living trust in one of the above places your state might allow you to cancel. In Pennsylvania, for example, the customer gets a three-day “cooling off” period to cancel the agreement.

Some living trust promotions are actually channels for getting the recipient’s personal and financial details. (This may be a way to build direct mailing lists to market annuities and other financial products.)

How to Handle a Living Trust Solicitation

If you’re getting solicitations as text messages, delete. Automated sales calls? Don’t engage. Approached by an unfamiliar company? It’s probably best to decline.

If you ever receive an offer that appeals to you, bounce it off someone you trust. It’s not bad manners to say “No, thank you, not at this time.”

And if you ever do want to set up your estate plan, get an opinion from an attorney who you pick to call.

Need advice, and not sure where to start? Check your home county’s bar association for its attorney referral service. Set up a meeting with an estate planning lawyer to learn if the trust really is right for you, or if a different approach is better.

Takeaway: Look Before Leaping

It’s wise to plan in advance for how your deed and other valuables will be passed along after your death. Setting up a living trust is one option. But it is not for everyone.

Most people don’t own property in another state — meaning their estate wouldn’t have to go through two probate cases under two different sets of laws. So, most people are just fine passing property through a will. In many states the probate system is reasonably priced, helpful, and  efficient for the estate of a person who has left a will.

Not sure what’s best for your situation? When thinking about passing your assets along to the next generation, your and your loved ones’ interests will benefit from an trustworthy attorney’s guidance.

Disclaimer: This information is provided for general educational purposes and is not legal advice. Laws vary by state, and readers should consult an attorney for personalized guidance.