WHAT TO LOOK FOR WHEN HAVING A LIVING TRUST WRITTEN
BE CAUTIOUS OF INDIVIDUALS MARKETING "TRUST PACKAGES"
Recently, there has been a proliferation of organizations marketing boilerplate, poorly written and ineffective "Living Trust Packages" to the unsuspecting.
These "trust packages" are being sold by insurance agents, "financial planners", and other individuals in the financial services field, usually "on the side" from their company's authorized products or services.
They frequently have little or no expertise in estate planning or knowledge about trusts other than that provided them by the marketing organization. The "agents" are paid a substantial commission for each "sale" of a "trust package". This approach is frequently used by fly-by-night companies, often operated by former insurance agents or "financial planners" who want to cash in on the lucrative senior market by selling something that costs them almost nothing to produce for hundreds or thousands of dollars. The forms they use, supposedly written or reviewed by their staff lawyers, are mass produced and sold over and over to the "agent's" unwary "clients" with each new family's name inserted into the documents by a word processing program.
Modern word processing equipment and laser printers often make those documents look as though they were beautifully tailored for each individual, when in reality they are nothing more than duplicates of the last one sold, with new names printed in the blanks. The completed documents are then placed in an expensive leather or other attractive binders and personally delivered to the "client's" home by the "agent".
The problems with trusts marketed in this manner are many. The most serious is that the purported "trust document" may or may not comply with the laws of California, or anywhere else for that matter. It often turns out to save costs, the unscrupulous trust marketing organization had no "staff attorneys" at all and the documents were neither written nor reviewed by attorneys. If that is the case, the trust may be held void and the estate placed in probate to be distributed under the laws of intestate succession.
MASS-PRODUCED TRUSTS ARE NOT ESTATE PLANNING
Even if the document complies with state law, it should not be confused with estate planning. Mass produced "trusts" are more likely than not to be inappropriate for the "client's" particular circumstances or the needs of the beneficiaries because each individual's needs are different and no mass-produced document could begin to meet the needs of most people.
For example, There may be significant tax advantages lost forever upon the death of the first spouse if an A/B trust was not used or if it was not correctly written. However, if another married couple was forced into an "A/B" trust when there is no reason, other than it is the form the trust marketing organization has in their computer, there would be additional and unnecessary costs and inconvenience upon the death of the first spouse with no benefit whatsoever.
SUBSTANTIAL COMMISSIONS PAID TO "AGENTS"
Because of the substantial commission structure, these trust marketing organizations are charging as much or more for an expensive notebook with a duplicated trust in it than many attorneys are charging for quality estate planning services, including a trust drafted to meet their client's specific needs and desires. Typical sales commissions paid to life insurance agents and "financial planners" by these trust mass marketing companies add $500 or more to the total price paid by the person "buying the trust". Some trust marketing organizations pay the "agent" up to 70% of the total price they charge.
It is interesting to note that many of these organizations tell their "clients" that it is unnecessary to spend the additional money to have a trust written by an expensive lawyer when their paralegals can do the job for much less. Then they charge as much or more than attorney would charge to do the job correctly!
Probably the greatest danger to your estate is when the insurance agent or "financial planner" has obtained a do-it-yourself computer program and has decided to write and market their own trusts to save overhead. Again, with a laser printer, fine paper and a nice binder, these "trusts" can look great.
It may save them overhead but it could be disaster to your estate. A good trust and a bad trust look pretty much alike sitting in a binder. It is only upon your death that the differences may become very apparent.
QUESTIONS TO ASK THE PERSON SELLING YOU A TRUST
1. What is the name, address, telephone number and License Number, of the attorney preparing the documents? Is the attorney's office somewhere realistic for me to visit in the future, should I need assistance?
2. Is the person "selling" the trust receiving a commission and if so, how much?
3. When do I meet with the attorney in person?
4. Can I call and ask the attorney questions should they arise in the future or does the "trust seller" have to act as a middle man?
5. Will the trust preparer put in writing that the attorney/client confidentiality privilege applies to me and no information about my estate will be disclosed to anyone? Will the attorney sign it?
6. Does the "trust seller" market other financial services? Is the trust selling process being used just to find out what assets I own in order to sell me something later?
7. Who will prepare and record the deeds and write letters to transfer my property to the trust. What are the charges? Will I have to do it myself?
8. (If you are a married couple) Is the trust an A/B trust and specifically, why do we need one?
9. Does the trust include a "Special Instructions to Trustee" document to make specific gifts of personal property and "Supporting Documents" (Durable Powers of Attorney for Property management and Health Care, Pour-Over Wills, and Living Wills)?
10. Are the Durable Powers of Attorney the "Statutory Short Form" minimums or are they more detailed to be integrated with my trust? Do they include advisement?
11. Are the Powers of Attorney immediately effective or do they take effect only after I become disabled?
12. Who is going to notarize the documents and is there a charge for this service, or is it included?
13. How much is my trust going to cost and are there any additional hidden costs of any kind for anything else necessary to complete the trust and transfer all of the assets?
14. How long have you been "selling trusts?" How many have you "sold?"
By the time you have asked these questions, most "trust salespeople" will have excused themselves and recommend that you see an attorney to prepare your trust!
AVOID TRUST FRAUD
Trust fraud is a growing problem. If a trust seller wants you to sign "right now", or if you feel a high pressure close, do not do it. If you feel uncomfortable, there is probably a good reason. Whatever wondrous opportunity they might offer will probably still be available tomorrow or on another day. Ask the trust seller if they would mind if you would get a second opinion. If the trust seller objects, stay clear of them. Do not hesitate to ask for local references. Legitimate businesses are delighted to provide the names of persons they have provided satisfactory service to. If they object to providing references, they probably do not have them. If you suspect someone is trying to defraud you in selling you a trust, call the California State Attorney General at (916) 445-1254.
AVOID OUT OF STATE TRUST MARKETING ORGANIZATIONS.
It is unlikely that an organization based outside the state of California is drafting trust documents based upon California laws. The laws concerning wills, trusts, and estate planning of every state are slightly different. There is no such thing as a single trust that is equally effective in all of the states.
IN CONCLUSION
The quality of your trust has everything to do with how easily and how much of your estate will pass to your heirs. If it is poorly done, the result can be unnecessary costs and tax liabilities, delays and emotional stress for your loved ones. Choose its author with care.
As Aldo Gucci once said, "The bitterness of poor quality is remembered long after the sweetness of low price has faded from memory."