Beware of Living Trust Scams

Written By: Attorney Jeffrey A. Marshall CELA* 

Originally published in the Williamsport Sun-Gazette's Insights & Opportunities Column on May 21, 2006

A trust is an agreement through which you transfer something you own to another person, called a trustee, to manage. The trustee then manages the assets you turned over for your benefit or that of anyone else you select.

Properly used, trusts are legitimate and very useful estate planning and asset management tools. Unfortunately, they are sometimes used to sell inappropriate services and investments to seniors.

According to Consumer Reports, so-called "living trusts" "have also become a scamster's tool for preying on unwary seniors worried about preserving assets for their family but for whom such a trust is inappropriate." Such schemes are common throughout Pennsylvania . 

From time to time, the Pennsylvania Attorney General files lawsuits against promoters of living trusts.  In a press release dated April 27, 2006 , Attorney General Tom Corbett announced the filing of yet another complaint against the operators of a living trust sales scheme who are accused of deceiving elderly consumers. 

The suit names eleven defendants, including a lawyer, Brett B. Weinstein, a number of licensed insurance agents, and others.  Attorney Weinstein and his co-defendants promoted their living trusts in Lycoming County as well as other areas of Pennsylvania .    

The Attorney General's complaint alleges that the defendants market their estate planning services to mostly older consumers through mass mailings and seminars to induce the purchase of their estate planning documents and annuity products.

According to the Attorney General's press release, "[t]o make the sale, the defendants falsely infer that:

    *       The non-lawyer representatives are attorneys or employed by Weinstein as members of his legal office, when they are actually insurance agents who work for American Family or Heritage Marketing or both.

    *      The non-lawyer representatives are qualified to legally advise consumers regarding the advantages or disadvantages of revocable living trusts, probate and other estate planning matters.

    *      The probate process will greatly reduce the size of the decedent's estate because of attorney and executor fees.

    *      Revocable living trusts will lessen or eliminate taxes.

    *      Probate will expose private matters to the public but a trust will keep everything private.

    *      Probate exposes a decedent's estate to litigation but a revocable living trust will not.  

    *      Court costs are very expensive and probate will result in delays.

    *      Revocable living trusts meet their needs without fully explaining or examining other estate planning vehicles.

    *     Other estate planning vehicles are inferior and have negative drawbacks.

    *      They were "representatives," "estate planners," "asset preservation specialists," or other titles when they were insurance sales persons.

    *      They were exercising independent, unbiased judgments about the consumers' estate planning options when they were primarily interested in making large commissions from the sale of revocable living trusts and annuity contracts. 

After consumers agreed to purchase the revocable living trust plans, the defendant then persuaded them to exchange or convert their investments for various types of annuity contracts, even if that move had a negative financial impact or tax consequence, the suit alleged.

As part of the overall scheme, the complaint also accuses the defendants of preying on elderly consumers by selling long-term deferred annuity contracts to those who would not live to derive full benefits, misrepresenting the rates of return, costs, penalties and other terms of the contracts, plus using scare tactics or omissions to sell estate planning products that were not appropriate to their needs." 

The Attorney General's press release is available online at: http://www.attorneygeneral.gov/press.aspx?id=1178.

If you feel you have been victimized by a living trust scam, you can file a complaint with the Attorney General's Office by calling 1-800-441-2555 or electronically by visiting http://www.attorneygeneral.gov/.

Living trust scams continue to plague seniors throughout Pennsylvania . Seniors should be particularly wary of presentations made by non-lawyers or solicitations by individuals from outside of the area. Deal with an experienced local attorney. Check the attorney's reputation. If you have doubts, get a second opinion.

There are many appropriate uses for trusts in estate planning.  For example, trusts can be used to obtain professional money management, limit death taxes, provide for inexperienced or incapacitated family members, and protect assets from nursing home costs.  For further information on planning using trusts, please visit our website at www.paelderlaw.com.

Jeff Marshall is Certified as an Elder Law Attorney by the National Elder Law Foundation and is the author of Elder Law in Pennsylvania. He is the managing attorney of the Elder Law Firm of Marshall, Parker & Associates with offices in Jersey Shore, Williamsport, Wilkes-Barre & Scranton.  He can be contacted at webmail@paelderlaw.com.

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