A living trust is a form of estate planning that allows you to control your money, property, and other assets while you are still alive but to have those assets distributed to who you choose when you die. Depending on your financial situation, a living trust may be appropriate, but it is not for everyone.
Estate planning involves important legal, financial, and personal decisions. If estate planning documents are not properly prepared or executed, they may be invalid, which could lead to lasting damage.
While there are many professionals who can help you with estate planning and trusts, some scammers may try to take advantage of you or otherwise cause harm. For example, scammers working for “living trust mills” will try to convince people to buy financial products they do not need, pay for estate planning that turns out to be defective, and provide personal and financial information so the scammers can steal their identity and assets. These scammers often solicit senior citizens by phone, mail, or email, or at churches, assisted living centers, and other places where seniors gather. They may offer seminars or other “free” information about trusts, wills, taxes, or the need to update an existing trust. These scammers pose as estate planners or financial experts and may schedule follow-up appointments in your home to gather information. They may use scare tactics to make you believe your existing investments are unsafe or that they can help you earn higher interest, misrepresenting the value of the trust or financial product they are selling.
Here are some tips and information to keep in mind:
- Scammers may call themselves trust advisors, financial experts, senior estate planners, or similar titles, or pose as attorneys or paralegals, to get you to trust them. Don’t fall for their titles, and if they say they are licensed or have government accreditation, make sure to confirm with the government agency.
- Not everyone needs a living trust. Be wary about anyone who says otherwise or promotes a one-size-fits-all trust or trust kit.
- Don’t let a sales agent scare you into believing that your current investments are unsafe or lure you into believing that their product can earn higher interest with less risk. Agents usually get paid by high commissions on living trust packages and financial products they sell; their goal is to sell, not to protect you.
- Make sure you understand the terms of any financial products or trusts before agreeing to them. Find out what costs may be associated with a product. For investments, make sure you understand how liquid the product is—you may not be able to use your funds before some specified date without paying substantial penalties. For example, seniors can find themselves trapped in annuities that will not complete paying out until some very distant future date.
- Watch out for companies that sell trusts and also try to sell you annuities or other investments. Different types of products have different advantages and disadvantages. There are many factors to consider based on the particular product and your situation.
- Sales agents may falsely claim that annuities are safe or guaranteed by the government. Annuities are not 100% safe, and only a portion is guaranteed by the state—insurance companies can and do fail and their assets may not be enough to repay customers’ investments. Sales agents may also fail to disclose substantial surrender penalties that apply on death or if the annuity is canceled during the first several years of the annuity.
- So-called “promissory notes” may be very risky. They are not insured by the FDIC or other government agency and they may not even be registered as securities with the state. These companies are often not regulated; they can and do fail and there may be few or no assets to repay customers’ investments.
- Make sure you understand the possible early withdrawal penalties or tax consequences that may be incurred when transferring stocks, bonds, certificates of deposit, or other investments into annuities or other products.
- Don’t let a sales agent pressure you into agreeing to or signing anything until you have time to review. Choosing an investment or figuring out what estate planning is right for you involves important financial, personal, and possibly tax issues. Take time to carefully do your own research. Before you agree to any investment or trust, discuss and review it with people you know and trust, such as your financial or tax advisor, attorney, and trusted family members. There may be tax or other consequences when you withdraw money from an investment that you may also want to review with your advisors and family.
- Be careful that any estate planning professional you work with does everything correctly; otherwise, your trust may be defective. Documents in trust packages must comply with the law, and the law requires certain procedures for executing or witnessing wills and other documents. If these procedures and requirements are not followed, your estate planning documents may be subject to challenge. Also make sure that the professional your work with has assets “funded” or transferred into the trust properly.
- Always ask for a copy of any documents you sign, and make sure you have a copy of the final executed documents.
- Know your cancellation rights.
- With some exceptions, consumer sales that take place in the your home or away from “appropriate trade premises” can be cancelled within three days. For more information, see dca.ca.gov/publications/legal_guides/k_9.shtml.
- If you were 60 years or older when you bought an annuity, you have 30 days from the date you received the annuity to cancel it without paying a surrender penalty on the annuity.
An attorney qualified in estate planning can help you decide if you need a living trust, review an existing trust or will, or provide other legal advice about estate planning. As with any other product or service, you should do your homework before you decide on one attorney. Contact several attorneys and shop around for an attorney who is right for you. You may obtain a referral to a certified lawyer referral service by contacting the California State Bar at (866) 442-2529 or at calbar.ca.gov/Public.
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