If you are age 50 or older, you should take special care when buying living trusts. Your age group is often a special target of sales persons whose goal is to sell you something without carefully analyzing your needs.
It is 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 consumers lose from $500.00 to $5,000.00 through the purchases of living trusts. Often families face potential 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 you attorney and/or accountant.
(3). If you conclude that a trust might be right for you, deal directly with a licensed Texas Attorney who has the expertise in estate planning.
FRAUDULENT AND MISLEADING STATEMENTS USED IN LIVING TRUST SCAMS
Purveyors of Living Trusts promote their business by making false, misleading or incomplete statement about the probate process, guardianships and the taxation of estates. Such statements include:
(1). Living trust save taxes. Your estate can be reduced by a 55 percent death tax.
Misleading. Most Texans' estates will face no death taxation at all. If your estate is taxable, a will can and will accomplish exactly the same tax savings as a trust at much less cost.
For persons dying in the year 2017, the estate tax exemption is $5,250,000.00. If your estate exceeds $5,250,000.00 (or is a husband's and wife's combined estates exceed this amount) no matter who the beneficiary is, you should consult with your attorney. Remember that Texas is a community property state and when one spouse dies, you are dealing only with one-half of the total value of the community estate. Also, property placed in a Living Trust can loose the benefit of stepped up basis under some circumstances. These are only a few of the reasons to consult with your attorney and/or accountant.
(2). Living Trusts will help you qualify for public assistance benefits.
False. A living trust will not help you qualify for public assistance, particularly nursing home Medicaid benefits.
(3). 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, just like wills, are subject to attack on the basis of lack of capacity, undue influence and fraud.
(4). 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 death, these assets are subject to the claims of your estate's creditors.
(5). Living Trusts avoid the expense of guardianship.
Misleading. A living trust is helpful to avoid the expense of a guardianship in case of your future incapacity. In most circumstances, a durable power of attorney, medical power of attorney and a directive to physicians are a simple and less costly way to achieve the same goal.
(6). Attorneys charge from 3 percent to 10 percent or more to probate you estate.
False. If your family wished to hire the services our firm, our fees are based upon an hourly charge. In fact most attorneys in Texas charge an hourly rate for their work.
(7). Probate takes years to complete.
Misleading and Very Unlikely. Nontaxable probate estates generally only take 9 months or less to complete. There are rare circumstances where families and/or the IRS fight for and extended period after death. Such disputes can cause delays in the administration fo either a probate or a living trust. In most circumstances the administration of a living trust is no more time efficient than the administration of a will in probate.
(8). Probate requires excessive time and money.
False. Texas has adopted a simplified probate process under the Texas Probate Code. These Independent Administrations, which account for more than 80 percent of Texas probates, involve only one court hearing and the filing of an inventory. Independent Administrations can be accomplished through a properly drafted will by your attorney (not one of the will forms available in office products stores or the internet). It is not usually available if there is no will.
(9). Everyone should have a living trust.
False. While a living trust is appropriate for some people, the cost of creating, funding and administering as living trust outweighs the benefits for many people. It is important to decide what your needs are before creating a living trust with your attorney. For example, the living trust can be an important device to enable a person to obtain assistance in managing assets. Many person lack the capacity to manage their assets, or have lost that ability through ill health. For person who own out-of-state property, the living trust can help avoid the need to probate their will in that state. If neither of these goals are your objectives, however, a living trust may not be an appropriate tool for you.
(10). The Living Trust is the only way to avoid probate.
False. The goal of avoiding probate as a goal unto it's own, in a false and costly goal. However, if your goal is to avoid probate, there are several less costly ways to do so. Joint tenancy with rights of survivorship and multiple party accounts with financial institutions are common and inexpensive methods of avoiding probate. However, always consult your attorney before proceeding with these options, as they may likely conflict with a well thought out and crafted estate plan.
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 in your home remember:
(1). Always take sufficient time to make your decision.
•Legitimate advisors understand when you want more information about their services or products.
•Be sure to talk with someone knowledgeable whose advice you value when considering a trust.
•Never respond to an offer you do not 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 Texas Attorney who has an expertise in estate planning.
•Be sure you are working with someone with the necessary training and education and don't be afraid to ask for evidence of such.
•If a trust is right for you, an attorney with knowledge of Texas law should draft it. The laws that apply to trusts vary from state to state. Forms, kits or computer software programs are not tailored to the requirements of Texas law. A licensed Texas attorney with expertise in estate planning and with whom you have a prior relationship should prepare, or at least review, your living trust. Also, a trust prepared by an attorney will cost less that the prices charged by trust salespersons because they are selling other product and services to complete their living trust.
HOW 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, and
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 and costly partnerships, limited partnerships, family partnerships and limited liability companies.