Tuesday, March 17, 2009

Protecting Consumers from Fraud - Living Trust Scams

There is no end to the creativity of a con artist. They can rip off billions like Bernie Madoff in an elaborate Ponzi scheme, or steal thousands of dollars from an unsuspecting senior.

Regardless of the thief's degree of sophistication, consumers across the nation lose billions of dollars each year to fraud. According to a study conducted by AARP, people over the age of 50 are especially vulnerable and account for half of the victims of scams.

The scam artist prefers to target older individuals because they have spent a lifetime saving for retirement. Con artists use a variety of tools to contact potential victims including the mailbox, telephone and the Internet. Others may target widows or widowers to take advantage of their vulnerability and loneliness.

We can stop con artists from victimizing family members if we take the time to educate ourselves and our friends, parents, and co-workers about scam artists and how they operate. Today's topic is Living Trust Scams.

The Washington State Bar Association tells citizens: "Revocable living trusts have become a popular alternative to the traditional Washington state will as a way to pass property on when you die. Even though Washington's probate system is among the simplest and least expensive in the nation, many citizens are attracted by the possibility of even quicker and easier asset transfers."

"But revocable living trusts have some drawbacks. Here, to help you decide if a revocable living trust is right for you, are answers to some of the most frequently asked questions about these trusts." http://www.wsba.org/media/publications/pamphlets/revocable.htm

The Living Trust Scam: (information courtesy of the WA Attorney General's Consumer Warnings)

The living trust scam attempts to get you to purchase a trust. It plays on the fear that probate costs and estate taxes will erode the value of your estate. While living trusts can be a useful tool for some, many unscrupulous sales persons use it to simply get in the door and sell high-commission investments to consumers, whether or not it is the best thing for them.

The Opening Pitch
“Do you want to leave a legacy for your grandchildren and not have the government take all the money you have spent a lifetime saving? Come to a free seminar to learn how.”

The Presentation
You respond to such a mailer, phone call or advertisement by attending a workshop. Or you might call to find out about it and someone will come out to your home to present information. They will sign you up for a living trust by having you fill out forms that disclose all of your financial assets. Once they have seen your finances, they begin to recommend different investments, usually insurance type products like annuities, in order to earn high commissions off the sale of those products.

The Result
Sometimes the living trust document you buy is not filled out properly because lawyers are not doing it. If these documents are filled out improperly, you may end up going through probate anyway, the very thing you were told you could avoid. In addition, many older people end up buying investments that are not appropriate for them given their situation.

How to Avoid It

If you want to know if a living trust will truly help you, you should get the advice of an estate-planning attorney. You can find the name and phone number for such an attorney by calling your local bar association, lawyer referral service.

Washington Attorney General's site for Consumer Protection: http://www.atg.wa.gov/SafeguardingConsumers/default.aspx

Forbes Article on Madoff and other famous Ponzi scheme artists: http://www.forbes.com/2008/12/12/madoff-ponzi-hedge-pf-ii-in_rl_1212croesus_inl.html

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