Legal News

Many people and millions of dollars are being taken in by living trust scams. Overselling (or lying about) the benefits of living trusts causes thousands to spend money on living trusts they do not need.

According to CNN, states attorneys general have become increasingly concerned about the sale of living trusts to seniors who often do not need them and can in fact be harmed by purchasing them.

First off, what is a living trust? A living trust is not the same thing as a living will. Living wills allow people to communicate their preferences about medical treatment should they become incapacitated.

A living trust, on the other hand, is a tool by which someone can transfer assets to a trust during their lifetime. In certain specific situations, living trusts can be useful for avoiding the probate process and/or minimizing estate taxes upon one's death. However, for most people, living trusts are not needed. CNN cites the AARP as claiming that only 5% of the population should consider a living trust.

See FindLaw's Law & Daily Life for a breakdown of when a living trust might be useful.

As far as the scams being run primarily on senior citizens through seminars, luncheons, in-home, telephone and other hard sales tactics, be aware of these false (or at least misleading) claims about living trusts.

1. Living trusts are the only (or the best) way to avoid probate. Though living trusts can be an effective way for some to avoid the probate process, they are not the only way. Most importantly, many people who would never have to go through probate anyway are buying them. For example, jointly owned property would most often pass to a surviving spouse without going through probate. Find out if you would be subject to probate. Then decide whether avoid probate would be worth it, and which of the multiple ways to do so would be preferable.
2. You need a living will to help you avoid estate taxes. Even if your estate would be subject to estate tax, there are a variety of tools to minimize this. Living trusts should be viewed as one possible alternative.
3. Living trusts will help avoid contested wills.Wills and trusts are separate legal documents. Having a living trust will not prevent a fight over your will.
4. Living trusts help you avoid creditors. This is false. Creditors can go after the assets in your living trust.
5. Living trusts will help you qualify for public assistance benefits. This is also false.
6. This living trust is approved by the AARP. False. The AARP does not sell or endorse any living trust products.
7. This living trust was created by an attorney. Many of the living trust packages offered are cookie cutter templates which may not adhere to the specific requirements of your state. Even if an attorney was ever involved in its creation, no attorney will be making sure it works for your needs.

To plan out what will happen with your assets, consult an estate planning attorney, who can help you choose from all options whether a living trust would be applicable and whether it would be the best way to achieve your goals.

• Living Trust Scams and the Senior Consumer (State Bar of Texas)
• Estate Administration (FindLaw)
• Avoiding Probate (FindLaw)
• Estate Planning Needs of the Elderly (provided by Holstrom Sissung Marks & Anderson APLC)
• Colorado Probate FAQ (provided by Glatstein & Obrien LLP)