As we discussed in a column earlier this past summer, the State Bar of Michigan Elder Law and Disability Rights Section and the Probate and Estate Planning Section have been promoting A Living Trust Education Initiative. The goal of the initiative is to educate Michiganders about estate planning scams and what to look out for.
As we also 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.
Not too long ago I received one of these lead cards offering a free 24 page book about estate planning. I sent it in to get my free book. A short time later I received a phone call from this outfit. Even though I requested it, they refused to send the “free” estate planning book by mail, It had to be hand delivered to me at my home by one of their representatives. So I scheduled a home visit. I wanted to see for myself what one of these outfits was telling prospective victims.
When the company representative arrived at my home, he was very nice. When he started into his spiel about estate planning, I asked about the free book that he was supposed to deliver and that was the purpose of his visit. He feigned surprise and said that he received information from “the office” that I wanted to discuss estate planning. He said did not have the book on him, but had some in the car that he could get before he leaves.
He then continued with his script. It soon became very clear that the company representative was a trust peddler. He was not an attorney, he was a retired Detroit policeman. His job was to hook the fish and reel it in. This is a common bait and switch tactic used by these trust peddlers. They get into your home under the guise of providing estate planning information and then try to sell you a trust.
He talked about the company he worked for and it was a four attorney law firm. I asked about the company that sent the lead card and the confirmation for the appointment which was not the law firm. He said it was from one of their affiliated companies. Their affiliated group was a “one-stop” shop. If you go with them, you do not need to go anywhere else. They can draft your estate plan, handle all your insurance needs, prepare your taxes, get you a mortgage and provide you with all the investments you need.
If you go with them and never consult with any other advisors, then you may not have other advice from anywhere else. That is what these outfits are counting on. They want you to be totally dependent upon them.
The script continued with scare tactics. You could lose your home if you went into the nursing home. You only can keep certain assets when you go into the nursing home. Their plan will protect you. What he did not tell me was that there was a whole lot more that would have to be done to implement an asset protection plan upon a nursing home admission. He said just enough to make it sound believable.
He talked about trusts, financial and health care powers of attorney, medical directives, certificates of trust and other estate planning legal documents. He attempted to explain what these documents were, what their legal effect was and how they could benefit me. Some of the things he said were partly true. Some weren’t. However, most all of it was misleading and directed toward one goal – sale of a trust plan.
Without knowing what your situation is, what your assets and income are, he explained that they have a plan for you. He said you do not have to pick and choose what you want in your estate plan because they know what you need and will provide it.
This is quite common with trust mills. They have a single trust form, change the names to protect the innocent and they are done. That is why they can prepare so many trusts in a year, everyone is the same. He said the firm did 1440 trust plans last year alone all over the state of Michigan.
The trust peddler then explained that for one low fee, you are set for life. He said that all trust funding was included, any updates are included and settlement of your estate and trust after death is also included. You never have to pay them anything ever again.
I asked him how the firm could afford to provide all these services in the future without any revenue to support the expenses of the firm. He said that they are always selling new trusts, so the revenue from the new trusts will support the firm to provide services to the old trusts. This sure sounds like the old Ponzi scheme to me
He then presented me with the contract for the trust plan. The contract did not quite follow what he was representing. For example, it only included a single consultation after a death to discuss estate and trust settlement. It did not include the actual settlement services, such as providing the proper notices to creditors and beneficiaries, tax reporting and probate court filings.
Also, the contract did not provide trust funding services. If you recall from my previous columns, trust funding is completely and correctly designating your trust and individuals as owners, beneficiaries and insured parties of your assets. The contract only included one consultation with a financial professional to discuss trust funding.
This is a well-known tactic used by these “one-stop” shops. What often happens at this “funding” meeting is that you are told that your trust will not work unless you put everything you own with them, and often in annuities. The $2,000-$4,000+ you pay for your trust plan is just a drop in the bucket compared to the commissions they can earn on the sale of annuities. Annuities are among the highest commission financial products out there.
How do you protect yourself? Be on guard and on the lookout for these scammers. Don’t be a victim. Here are just a few warning signs and common tactics used by trust and annuity peddlers:
- Informational meetings including a meal.
- Lead cards in the mail offering free estate planning information.
- Non-attorneys coming to your home to sell you an estate plan.
- One-stop shops that do estate planning, investments, taxes, insurance and related services.
You can also protect yourself by using knowledgeable estate planning, investment, insurance and tax professionals in order to keep you in control during your lifetime when you are alive and well; provide for you and your loved ones in the event of your mental disability; and when you are gone, you can give what you have to whom you want, when you want, the way you want; all at the lowest predictable overall cost to you and your loved ones.
By: Matthew M. Wallace, CPA, JD
Published edited November 23, 2014 in The Times Herald newspaper, Port Huron, Michigan as: Trust mill scammers alive and well