Reputable estate planners need to be aware of what scammers are pushing, if only to assuage the fear of their clients.

If you’ve tried to explain the benefits of a living trust to a client or prospect, only to have them be very suspicious of the entire plan, there might be a simple explanation. It might be that they have been warned about the potential scams involved in setting up a living trust.

And these fraudulent advisors, setting themselves up to prey on unsuspecting clients, are very real. Sometimes the benefits of a living trust are just oversold, promising things that will never and can never materialize. Sometimes the pretense of a living trust is just used to push annuities or other types of unsuitable investments.

Reputable estate planners need to be aware of what these scammers are pushing, if only to assuage the fear of their own clients. Here’s what you need to keep in mind:

  • Scammers are often interested in being sales agents for products, such as annuities, that just happen to fit well into the living trusts they are pushing. The purpose of sketching out a living trust may just be to permit these scam artists to get full knowledge of a potential client’s assets and retirement plan. Clients should be coached to always ask how an advisor is getting paid, and especially if they’re being compensated for the products they’re pushing.
  • These sales agents often pose as a “trust advisor” or “senior estate planner,” although they don’t have any education or credentials in the area. Clients should always have the right to ask for an advisor’s credentials.
  • These fraudulent advisers often work in assisted living centers, churches and other places where seniors tend to gather, offering free seminars and other sales presentations. This is important to keep in mind, not just because nearly all reputable estate planners will work out of a home office. There is a “Cooling Off Rule” that allows a person who sets up a living trust anywhere other than the seller’s permanent place of business (including that client’s own home) three business days to cancel the entire deal.
  • Sales agents often peddle living trust “kits,” which can cost upward of a thousand dollars. These are often nothing more than standard estate planning forms that anyone can print out from the Internet. Some of these kits aren’t even valid in the states in which they’re sold.

Fraudulent sales agents often make overblown claims about what a living trust can accomplish. If one of your clients seems to believe that the trust can achieve any of the following, they may have been confronted by one of these scam artists:

  • Living trusts can help avoid the estate tax. This is true so far as it goes, but most middle- and working-class clients the scam artists prey on would fall far short of the $5.34 million in assets an estate would require to meet the threshold to even begin to pay the estate tax.
  • Living trusts can clear out assets so that the client will more easily qualify for public assistance benefits, such as nursing home Medicaid benefits.This isn’t the case.
  • Living trusts protect the assets they hold from creditors. Not only are assets in a living trust subject to creditors’ claims during the client’s lifetime, but the assets are subject to the claims of the estate’s creditors after the client’s death. 
  • Living trusts keep the clients from having his or her will contested. The living trust scam artist may claim that thetrust can’t be subject to a will contest, which is true as far as it goes. But the will itself can still be contested, and trusts can be subject to legal attacks on other bases.

Obviously, estate planners know how valuable living trusts can be for their clients. It’s important not to scare off clients or prospects be telling them that all the benefits that they’ve heard about are overblown. But it’s also important that they know a real living trust isn’t executed in one session at a hotel ballroom.

Encourage clients to shop around and get second opinions on everything before signing any piece of paper. And they should take their time, resist high-pressure sales tactics or short deadlines, and understand everything they’re signing. By being open-minded about even your own offers, you’ll help the clients understand that you’re worthy of their trust.

 

See also:

Preparing for a conservatorship

Letter of intent: a useful component of an estate plan

Financial power of attorney: weighing the benefits