LIVING TRUST / ANNUITY / AND PROMISSORY NOTE SCAMS
from State of California Attorney General Bill Lockyer
Living trust mills often solicit senior citizens by telephone, mail or seminars, offering “free” information about trusts, wills or taxes, or the need to update an existing trust. According to Attorney General Lockyer, “These trust mills often violate a number of California laws.” He continues, “To give their unlawful businesses legitimacy in the eyes of seniors, living trust mills may offer to do free seminars or other programs at senior centers, assisted living centers, churches or other places where seniors gather.”
How a Living Trust Mill Scheme Works
Sales agents, posing as expert estate or financial planners, often using bogus titles, such as “trust advisor”, “senior estate planner”, or “paralegal”, then schedule follow-up appointments after the seminars with seniors in their homes. These agents are sales persons, not experts in estate planning, and they usually get paid high commissions on the trust packages and annuities that they sell. Their goal is to sell their products, not protect the interests of the senior.
Sales agents are not attorneys, but they may mention an attorney who supposedly prepares the trust and represents the senior’s interests. An attorney may even appear at the seminar. But most victims never have a private consultation with an attorney who is an expert in estate planning or who reviews with them the various options for estate planning and considers the senior’s desires and needs before a decision is made as to the type of estate plan needed. Often seniors never even talk with an attorney, and the attorney does not directly supervise the sales agents’ activities.
Under the guise of helping the seniors to set up or update a living trust, the sales agents find out about the seniors’ financial assets and investments. Seniors rarely understand that the so-called expert they begin to trust is using the living trust as a means of selling them an investment to replace the investments they presently have.
Usually, the sales agents schedule a second home visit to deliver a completed trust and have documents signed, title of assets transferred to the trust and various documents notarized. Typically, the agents go over the assets to be placed in the trust and use that review to scare seniors into believing that their investments are unsafe and that by “moving” their money, they can earn higher interest with no risk. These agents are often insurance agents who are really there to try to sell annuities. The agents may also try to sell so-called promissory notes or other investments. Agents may have the senior sign documents to transfer the senior’s CD, mutual fund accounts or other investments to these other investments.
Documents, prepared by Living Trust Mill agents, may not comply with California law, or agents may not follow procedures set by law for executing or witnessing wills and other documents, which can make the documents subject to challenge. Agents often misrepresent the value of a trust, the disadvantages of the senior’s current investments, and the advantages of the investments the agents are selling.
The trust mill may not properly have assets “funded” or transferred into the trust.
Sales agents may fail to disclose possible adverse tax consequences or early withdrawal penalties that may be incurred when transferring stocks, bonds, certificates of deposit or other investments to annuities, so-called promissory notes or other investments offered by agents.
Sales agents may fail to disclose substantial surrender penalties that apply on death or if an annuity is canceled during the first 5 to 10 years, or more, of a proposed annuity.
Agents may even make seniors believe their bank accounts are less safe than the annuities or other investments the agents are selling. They may falsely claim that no one has ever lost any money in an annuity, that annuities are fully guaranteed by the state or that annuities are safe. 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 pay the full value of their customer’s investments.
So-called “promissory notes” are not insured by the FDIC or any other government agency and may be very risky. 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 left to repay investors.
How to Avoid the Living Trust Mill Scam
Lockyer says, “Planning an estate involves important financial and personal decisions. If wills, trusts, powers of attorney or other estate planning documents are not properly prepared or executed they can be invalid and cause lasting damage.”
Do not resort to services offered by these living trust mills at seminars, by telemarketing or mail solicitations.
Obtain a list of attorneys, who are certified as estate planning specialists, by calling the State Bar of California’s toll-free number for seniors: 1-888-460-7364
Receive written information about estate planning and how to select an attorney by calling the State Bar at 1-888-460-7364. (The State Bar also offers a videotape for use with senior groups that demonstrates common living trust scams and how to avoid them.)
Before buying an annuity or any other investment, or before withdrawing money from an existing investment, the Attorney General recommends seniors get copies of the sales offer and documents and review them with people they know and trust, such as their financial or tax advisor, their attorney and trusted family members before they sign anything.
What to Do If You Believe
You May Already Have Been Victimized
Report it to your local district attorney and the California Department of Insurance OR call the Attorney General’s Public Inquiry Unit at 1-800-952-5225. Consumer complaints may also be filed on-line at the Attorney General’s website at http://www.ag.ca.gov/consumers/general.htm
Return to Text Only Scam Index