State Bar of Montana

Living Trust Scams and the Senior Consumer

If you're age 50 or older, you should take special care when buying living trusts. Your age group is often a special target of salespersons whose goal is to sell you something without carefully analyzing your needs.

It's easy enough to become a victim. Living trust sales are a growing area of consumer fraud. Con artists make millions of dollars every year selling unnecessary trusts. Each year, thousands of consumers lose from $500 to $5,000 through the purchase of living trusts. Often, families face potentially greater costs after the consumer's death resulting from problems associated with the trusts.

To protect yourself, follow these guidelines:

1. Take time when making your decision. Do not fall victim to high-pressure "act-immediately" sales tactics.

2. Seek the advice of someone trustworthy and knowledgeable. Contact your accountant, estate planning attorney, banker or financial adviser.

3. If you conclude that a trust may be right for you, deal directly with a licensed Montana attorney who has substantial expertise in estate planning.

REMEMBER: Most people who lose money in living trust scams never see a penny of it again. Further, their loved ones may face additional costs after the living trust consumer's death.

Fraudulent and Misleading Statements Used in Living Trust Scams. Con artists promote their business by making false or incomplete statements about the probate process, guardianships, and the taxation of estates. Such statements include:

Your estate can be reduced by a 55 percent death tax.

Misleading. Most Montanans' estates will face no death taxation at all. There is no Montana inheritance tax on transfers to a spouse, children, or grandchildren. The federal estate tax affects only those who have estates greater than $600,000 in value which are transferred to someone other than a spouse or charity. It is true that unplanned estates over $3 million in value can face federal estate taxes at a marginal tax rate of 55 percent.

Living trusts save taxes.

Misleading. A living trust saves no more taxes than a will.

Living trusts help you avoid contested wills.

Misleading. Because a "trust" and a "will" are separate legal concepts, a trust is not subject to a will contest. However, trusts are subject to attack on the basis of lack of capacity, undue influence, and fraud. These same grounds can be used to contest a transfer by will.

Living trusts help you avoid your creditors.

False. During your lifetime, assets in a living trust are subject to the claims of your creditors. After your death, these assets are subject to the claims of your estate's creditors.

Living trusts avoid your spouse's claim to a share of your estate.

False. Montana law provides that a surviving spouse may claim a share of revocable trust assets.

Living trusts avoid the expense of guardianship.

Misleading. While a living trust may avoid the expense of a guardianship in case of your future incapacity, a durable power of attorney is a simpler and less costly alternative to achieve the same goal.

Attorneys charge from 3% to 10% or more to probate your estate.

False. If your family wishes to hire the services of an attorney to assist with a probate, your family may agree upon a reasonable attorney fee. That fee may be based on an hourly charge or upon a percentage of your estate. Recent surveys by the University of Montana indicate that an average fee, if measured by a percentage, is less than three percent of the estate.

Probate takes years to complete.

Misleading and very unlikely. There are rare circumstances where families and others clash for an extended period after a death. Such disputes can cause delays in the administration of either a probate or a living trust. In other circumstances, disputes with the Internal Revenue Service can cause more delays. However, in most circumstances the administration of a living trust is no more time efficient that the administration of a will in probate.

Probate requires court hearings.

False. The costs of creating and administering living trusts outweigh their benefits for most Montanans. For a few Montanans, the living trust is a useful device to obtain asset management. These individuals lack the capacity to manage their assets, or have lost that ability through ill health. They name family members or corporate trustees (typically, banks) to provide administration through a living trust. For a few other Montanans who own out-of-state real estate, the living trust can be a useful tool to avoid that state's probate process.

The living trust is the only way to avoid probate.

False. If your goal is to avoid probate, there are several ways to do so. Joint tenancy with rights of survivorship, multiple party accounts with financial institutions, and transfer on death (TOD) designations of securities are common and inexpensive methods of avoiding probate.

How Older People Become Victims of Living Trust Scams. Con artists make false and misleading statements to older people through:

  1. Telemarketing and mail solicitations
  2. Door-to-door sales
  3. "Free" seminars and workshops
  4. Advertisements.

 

Often, con artists attempt to meet in your home through offers of a free living will, a free power of attorney, or a free "estate analysis." Many also offer unnecessary partnerships, limited partnerships, "family" partnerships, and limited liability companies.

What You Can Do to Protect Yourself. It is very difficult to get your money back if you are cheated in a living trust scam. So before you buy, and better yet, before you allow a salesperson into your home, remember:

1. Always take sufficient time to make your decision

  • Legitimate advisers understand when you want more information about their offer or their company.
  • Be sure to talk with someone knowledgeable whose advice you value when considering a trust. Contact your accountant, estate planning attorney, banker, or financial adviser.
  • Never respond to an offer you don't thoroughly understand.
  • Avoid buying on impulse or succumbing to sales pressure to "act now".

 

2. If you conclude that a trust may be right for you, deal directly with a licensed Montana attorney who has substantial expertise in estate planning.

  • Be sure you're working with someone with the necessary training and education.
  • If a trust is right for you, it should be drafted by someone with knowledge of Montana law. Also, the trust will generally cost less than the prices charged by trust salespersons. If you have the misfortune of selecting an attorney who makes a mistake, you may be able to recover for the attorney's malpractice.

 

 

FOR MORE HELP CONTACT:

Montana Department of Commerce Office of Consumer Affairs
1424 Ninth Avenue
Helena MT 59620
(406) 444-4312

Montana Attorney General's Office
215 N. Sanders
Helena MT 59620
(406) 444-2026

American Association of Retired Persons [AARP]
601 E Street, NW
Washington DC 20049

For educational information concerning estate planning and living trusts, contact your County Extension Service.


Lawyer Referral & Information Service. If you need legal assistance and do not know an attorney, call the Montana Lawyer Referral & Information Service. You will be referred to a lawyer appropriate to your location and problem. Call 406-449-6577.

For more legal information, see the following web sites:
www.montanabar.org
www.MontanaLawHelp.org

 

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