The Low-Cost Living Trust Seminar | Avoiding Common Trust Scams

Something we all must look out for in our everyday lives are scams. These are, unfortunately, things that are very common when it comes to the financial industry or in matters concerning elderly people. The legal world is no exception here and I would like to take this time to warn you of two prevalent issues in the legal estate planning world - The "Low-Cost/Free Living Trust Seminar" and "Trust Mills."

To preface our post, there is, of course, nothing inherently wrong with a free estate planning or trust seminar. Plenty of law firms host them, ours included. However, the perniciousness arises in how they are conducted, who hosts these presentations, and when they are used to funnel unsuspecting people into a trust mill.

Estate planning or trust seminars, hosting by a reputable lawyer or law firm, are simply presentations where the presenter, usually the lawyer, goes over the topic at hand. Sometimes food is provided, and the attorney will either begin meeting with people right then and there, or they provide the option to schedule a meeting with the attorney to discuss their particular situation in detail.

The problem arises when these types of presentations are not actually hosted by an attorney. We've seen many ads where the host is banking on people being attracted by the lost cost of a trust and a free meal, that they won't realize the ad never says who is hosting the seminar itself. That or it only has the company name, which after googling, you find out who the real host is - usually either an insurance or financial planning company. Now they may know the basics of setting up a trust to avoid probate since estate planning is a complementary service to their industry, but they aren't an attorney, or at least not a licensed or practicing one. They are professionals in their fields but are using the trust as a lure to bring you into their area of expertise.

Every time we have had a client come in who attended one of these types of seminars, they tell us they get the basic information on trusts but that the presentation centered around also purchasing another product: life insurance, long-term care insurance, or an annuity. Again, we are not saying these individuals are inherently dishonest or unknowledgeable or that their products are no good, but, personally, I would like my insurance representative to be an expert in insurance and know how to find me the best insurance for my needs and circumstances; I would like my CPA or EA to be an expert in tax and navigating the tax code; and I would like my estate planning attorney to have an in-depth knowledge of estate planning law and all the nuances therein. These people, working on your behalf, should have deep knowledge in their fields and know where their field intercepts with another so they can coordinate with your other professionals to your benefit. Otherwise, you are hiring a jack of all trades but a master of none.

Additionally, this means you are working with someone who has an ulterior profit motive - commissions on sold insurance policies, commissions for sold annuities, or even ongoing commissions for any money locked up in an annuity or other financial product. Keep in mind, if funds are locked up in some type of product like an annuity, there can often be large penalties for early withdrawals or simply be inappropriate for your particular situation, especially elderly people.

Next, you should look out for "Trust Mills." By a Trust Mill I mean a company where there is a one-size-fits-all type trust, churned out with either minimal, or even no attorney supervision. These are a little harder to spot, especially if an attorney is involved. A seminar like I have mentioned, hosted by an attorney could actually be a way to simply funnel people into one of these trust mills. The main way to spot one is to ask whether you will be able to meet with the attorney for more than just a 10-minute meeting, after which the attorney hands you off to a staff member to gather your information. You should also ask if you can call and either schedule an appointment or even speak with the attorney on the phone. Will the attorney be the notary for documents (like the living trust) that require notarization, or will you only meet with a notary to sign, notaries being precluded by law from explaining legal documents they are notarizing unless they are an attorney? Finally, how much work is the company leaving on your shoulders - finding a notary, recording deeds to transfer property, or working with banks to retitle accounts?

Only licensed attorneys may practice law, but these trust mills are often run by non-attorneys who will either do everything on their own, or hire an attorney, usually one right out of law school, to be the "supervising attorney" meaning they are there to speak to clients who insist and to be, in essence, a liability shield.

The quality of trusts you can receive out of either one of these scenarios will often times be low. They will usually be competent enough to avoid probate based on their provisions as written. However, we have seen trusts with incomplete sentences, conflicting provisions, no safety-net language for long-term care or "what-if" scenarios, poor grammar, poor formatting, or with language that simply does not make sense as written. The worst offenders are when people are provided a trust, but are not provided, or sometimes even told, how to put their assets into their trust to begin with. An empty trust is invalid and does nothing to avoid probate. If you are working with a reputable lawyer, they should go over your accounts with you to determine which should go into your trust and which can stay out. They should prepare the appropriate deeds to transfer your real property to your trust and they should assist with recording that deed with the county recorder to update the chain of title. We have had multiple probates on property that should have been in trust, but the owner either went through a trust mill or got an off-the-shelf estate plan and didn't realize more work needed to be done than simply signing a form trust. That's great for us lawyers because it increases our fees (watch our video on probate fees are calculated) but it's horrible for the family as more of the estate is chewed up in legal fees due to the trust being set up poorly.

If you come across a business acing in an inappropriate manner, below are resources you can use to report them for harmful consumer practices.

California State Department of Justice: Helpful Consumer Information and Complaint Report

Consumer Fraud Section: How to find your local district attorney’s office

California Department of Insurance: Complaint Report

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