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Living Trust Scams and the Senior Consumer
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If you are age 50 or older, you should take special care when buying living trusts. Your age group is often a special target for 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 anywhere from $500 to $5,000 through the purchasing of living trusts. More often than not, families end up facing potentially greater costs after the consumers death, resulting from problems associated with these living trusts.

Fraudulent and Misleading Statements Used in Living Scams

Con artists promote their business by making false or incomplete statements about the probate process, guardianship, and the taxation of estates. Such statements include:

Your estate can be reduced by a 55% death tax

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 only effects those who have estates greater than $600,000 in value that are transferred to someone other than a spouse or a charity. It is true,however, that unplanned estates over $3 Million in value can face federal estate taxes at a marginal tax rate of 55%

Living Trusts Save on Taxes

A living trust saves no more on taxes than a standard will does.

Living Trusts Help You Avoid Contested Will

No trust is subjected to a will contesting because "trusts" and "wills" are separate legal concepts. Trusts are, however, subject to attack on the basis of lack of capacity, undue influence, and fraud. These same grounds can also be used to contest a transfer by will.

Living Trusts Help You Avoid Creditors

During your lifetime, any and all assets placed into a living trust are subject to the claim of your creditors. After your death, these assets are subject to the claims of your estate's creditors.

Living Trusts Avoid Your Spouse's Claims to a Share of Your Estate

Montana law provides that a surviving spouse may claim a share of revocable trust assets, such as Living Trusts

Living Trusts Avoid the Expense of Guardianship

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

Attorneys Charge from 3% to 10% or More to Probate Your Estate

Probate fees, which are established by the Uniform Probate Codes, differ per estate. The initial filing fee is, on average, $100 to file and other costs may be added on by the attorney depending upon publication costs, appraisals, sale expenses, etc. Major administrative fees, however, are set at a maximum level by the UPC. The personal representative is entitled to a fee of 3% for the first $40,000 of the value of the estate, plus an additional 2% of any amount beyond that $40,000. If an attorney is used, then the attorney's compensation cannot exceed 1.5 times the compensation allowable to the personal representative. The district courts can make exceptions in extraordinary circumstances. More information on probate can be found here

Probate Takes Years to Complete

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 IRS can cause more delays. In most circumstances, however, the administration of a living trust is no more time efficient than the administration of a will in probate.

The Living Trust is the Only Way to Avoid Probate

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 very inexpensive methods of avoiding probate.

How Older People Become Victims of Living Trust Scams

Con artists make false and misleading statements to older people by means of:

  • Telemarketing and mail solicitations
  • Door-to-door sales
  • "Free" seminars and workshops
  • Advertisements

Often, con artists attempt to meet you in your own 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, and limited liability companies.

What You Can Do to Protect Yourself

1. Always take sufficient time to make your decision

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

2. If you conclude that a living trust may be the right financial direction for you, contact a licensed Montana Attorney who has substantial expertise in estate planning. Also make sure that:

  • You are working with someone who has the necessary training and education to assist you
  • If a living trust is indeed right for you, then the trust should be drafted by someone with knowledge of Montana law. Also, the living trust will generally cost less than the prices charged by a trust salesperson. If you have the misfortune of selecting an attorney who makes a significant mistake, then you may be able to recover your funds due to the attorney's malpractice.


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

 

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, 3rd Floor
Helena, MT 59620
(406)444-2026

American Association of Retired Persons (AARP)
601 E Street, NW
Washington, DC 20049

 

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