This past week has been a busy one for attorneys from the State Bar of Michigan Elder Law and Disability Rights Section and the Probate and Estate Planning Section. Last Wednesday, 182 attorneys gave presentations to seniors and their loved ones in 122 locations in 51 counties across the state of Michigan as part of A Living Trust Education Initiative. Locally, it was held at the St. Clair County Council on Aging Port Huron Senior Center.
The goal of the initiative is to educate Michiganders about estate planning scams and what to look out for. As we have discussed in a number of columns, there is no shortage of non-attorneys willing to give legal advice about estate planning. The advice is often given for the non-attorney’s own financial gain.
The State Bar has received numerous complaints about estate plan salespersons practicing law without an attorney license by giving estate planning advice. The Michigan Attorney General has received complaints of deceptive sales practices by annuity and life insurance peddlers. Similarly, the Michigan Office of Financial and Insurance Services has also received complaints about annuity and life insurance peddlers who are misleading their customers and selling inappropriate annuities, life insurance policies and estate plans.
These peddlers have the sales process down to a science. They use two primary schemes for access to you and your money. The first is the free lunch or dinner presentation under the guise of providing estate planning or other information. The second is the home visit brought about by a lead card mailed to you offering free estate planning information that you filled out and mailed back to them. Some annuity and life insurance peddlers even use a combination of the two.
When you go to the free lunch or dinner presentation, they are so nice. They do provide estate planning information, but much of it is scare tactics such as by exaggerating the horrors of probate to get you to act. They then pull the bait and switch and tell you that they have the answer for you. Often the answer to your problems is the sale of a high commission financial product such as an annuity. Sometimes the answer is living trust that they will sell you at an exorbitant price, and that will only work if you fund your trust with a high commission annuity.
You are unable to leave the presentation without signing up with them. And they make it so easy for you. You do not have to pay them with cash or a check. They will happily accept your credit card. And when you get your trust, you never see the attorney, only the salesperson.
There is a newer version of this bait and switch tactic that preys on veterans and their families. You usually get information about VA non-service connected pension, also called Aid & Attendance. The financial product peddler may be disguised as a volunteer of a veteran’s service organization or non-profit. They will help you apply for the VA benefits, but in order to qualify, all of your assets will have to be invested in annuities.
You may have received a card in the mail that has some pretty fantastic things on it that sound too good to be true. It probably isn’t true. You respond to their offer for free estate planning or other information. I received one of these cards a little while ago and sent it in. A short time later, I received a call to schedule a home visit to deliver the free information. I asked the woman to just mail it. The caller refused, and said a company representative had to hand deliver it in my home and explain it because it is very complicated. I never did get that that free estate planning information.
The home visit is then scheduled. Once the company representative is in your home, he or she will treat the visit as a sales closing meeting. The peddler is very friendly and treats you so nice. The peddler is your new best friend. He or she puts you immediately at ease and you know that he or she can be trusted. Not! When your guard is down, you start sharing all kinds of personal information about your family and your investments.
When the peddler is selling estate plans, you will be told of all the exaggerated horrors of not having a trust, that your will is no good or that you will lose all privacy without a trust. You may even be told that an attorney will prepare a plan for you for a one-time fee, which includes unlimited changes for life. This makes you think that you are getting a great deal.
These peddlers will tell you that they are not attorneys, but then they will proceed to attempt to explain legal matters. You might be told that with a plan from them, after your death, you will avoid probate and there will be nothing to do other than to distribute the proceeds to your loved ones. Or you may be told about estate taxes or how their plan will protect your assets and allow you to apply for Medicaid in the event of a nursing home admission.
You are then told that to make your trust work, you have to fund your trust with the high commission financial products that the peddler is selling, typically annuities. These annuities and other financial products are where the real money is made. The commissions are usually much more than the cost of your estate plan. And you are locked into a financial arrangement that is not usually beneficial to you.
For example, with most annuities, you cannot take your money out for a certain period of time without incurring surrender charge penalties. I have seen annuity surrender charge penalties as high as 50% and surrender charge penalty periods as long as 20 years.
The peddler will then pressure you into making a decision on the spot, without having any opportunity to consult with your family. You are told you do not need a second opinion or that you shouldn’t waste your money by consulting with your attorney. You eventually get your trust in a fancy book. But you never see an attorney and the peddler does not explain your plan to you.
Sometimes, the home visit tactic is combined with the free lunch or dinner presentation. Instead of trying to sell something at the presentation, the peddlers will use the free presentation as a tool to schedule a home visit, at which they will then peddle their wares.
When you set up your estate plan, you should make sure that you are dealing with an attorney and that the attorney will counsel you so that your plan will keep you in control while you are alive and well; protect you and your loved ones in the event of your mental incapacity; and when you are gone, give what you have to whom you want, when you want, the way you want.
In order to properly advise you, your estate planning attorney should have a working knowledge of six areas of the law: estate planning; elder law; probate; real estate; income, estate and gift taxation; and business. Your attorney should specialize in estate planning and elder law. There are estate planning attorneys and there are attorneys who do estate planning. You want an estate planning attorney.
Ask your attorney what percentage of his or her practice comes from estate planning and elder law. If most of your attorney’s practice is devoted to estate planning and elder law, then you probably have an estate planning specialist. But if most of your attorney’s practice is devoted to divorces, criminal law, litigation or other areas of the law, then you probably have an estate planning dabbler.
Don’t be a victim. Protect yourself by being on the lookout for estate planning scam artists.
By: Matthew M. Wallace, CPA, JD
Published edited August 10, 2014 in The Times Herald newspaper, Port Huron, Michigan as: Who should you trust?