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Davidow, Davidow, Siegel & Stern, LLP
Long Island's Elder Law, Special Needs & Estate Planning Firm

Friday, December 24, 2004

Beware of Living Trust Scams

Unfortunately, it is becoming more and more common to hear about unscrupulous companies stepping up their efforts to market costly living trusts to older Americans, resulting in the jeopardizing of the buyer's economic security. According to the AARP, the Federal Trade Commission (FTC), and a number of state attorneys general, these high-pressure con artists have built an entire industry around older people's fears that their estates could be eaten up by probate costs or taxes, or that the distrubtion of their assets could be delayed for years. The solution, they claim, is a living trust. There is nothing wrong with the proper use of a living trust. Attorneys may recommend a living trust as an estate planning device for appropriate clients. However, salespeople masquerading as professional estate planners are working hard to try to convince older Americans that such trusts are for everyone. The problem is that many people don't need a living trust, a trust from a "kit" may not meet a particular client's needs and often these companies charge more than the service is worth. In addition, according to the FTC, some companies are using the living trust concept merely as a way to gain access to consumers' financial information and sell them other financial products, such as insurance annuities. Among the various dangers of "one-size-fits-all" living trusts, say AARP officials, is that in many cases they won't make the grantor and spouse eligible for Medicaid reimbursement of nursing home costs. In addition, some trusts improperly instruct the trustee to distribute property to beneficiaries immediately upon the death of the grantor. If creditors make a claim against the trust after asset distribution, the trustee becomes personally liable for any valid claims against the trust. According to an AARP study published in 2000, about four million people older than 50 with less than $25,000 in annual income may have purchased costly, unnecessary and potentially dangerous living trusts as a result of high-pressure sales tactics. The Federal Trade Commission has a checklist for consumers to go through before they sign any papers to create a will, a living trust or any other kind of trust. The Healthcare and Elder Law Programs Corp. (H.E.L.P.) has also created a website, annuitytruth.org to help make better decisions about annuities. Better yet, seek the advice of a qualified elder law attorney.

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