ASK THE RETIREMENT CONCIERGE: This estate planning move could be a disaster in disguise
Published - 08/18/15 - 01:47 PM | 6573 views | 0 0 comments | 6 6 recommendations | email to a friend | print
Dear SharonAnn,

I have been struggling with getting a family trust.

Although I live in La Jolla, I am very careful about every dollar I spend. The fees for a trust range from free on-line documents to attorneys who charge 2 to $3,000, or even up to 10! I have no idea about how to do the on-line trust. Then I heard about a trust specialist. He came to my house a couple of times, set up my trust, will and powers of attorney and charged only $550. I have a nice binder that holds everything, and I intend to read it soon. Now, he is checking out better investments for me and spoke about an annuity that provides an income I cannot outlive. He said it is much better than my bonds and CDs. I guess if he can handle my trust arrangements, he should know about investments.

It is such a good deal I just want to share the information with all my friends.

Signed: Delighted with the deal

Dear Delighted: Sorry to burst your balloon, but you have just stepped into Estate Planning Goof #1 That Could Cost You a Fortune.

The goof is in failing to read and understand your trust documents. If you spend some time reading it, you will see a most of the material in your binder is vague and generic. It may have many statements that don’t apply to your situation. For example, the statements often refer to children or grandchildren even if you have none.

It may be challenging for us to read our will and trust, but we must. We need to be responsible adults, and closing our eyes or ears just because something is hard to understand is no release of our responsibility. If truly it is a mystery, then find someone who can help you understand it – a friend or a family member.

The bigger problem is that you have also been scammed. How? The Living Trust Mills Scam works because people just love to get a bargain. $500 compared with $1,800 or $2,800 seems like a great deal. Under the guise of helping to set up or update a family trust, agents find out about your assets and investments. Then they misuse your information, and you, by scaring you about what you have in order to get you to buy something like annuities. There is nothing inherently bad about annuities, but you must understand the details, including the disadvantages like surrender charges along with tax implications and the financial strength of the insurance company that issues the annuity.

Many of these trusts have improper language that may cause them to be invalid, especially if they do not reflect state laws. This can cause lasting damage to your estate. They use templates and plug your personal information into them and act as if an attorney is involved. So when the time comes, they create great problems that you and your heirs will pay for dearly. The problems can put you into probate and drain your estate in fees, the very thing you wanted to avoid.

The California Attorney General’s Office tells us agents for trust mills are not attorneys. They often do not disclose your adverse tax consequences or withdrawal penalties when moving investments. Sometimes they offer “promissory notes” not insured by FDIC and highly risky nonregistered securities. Beware if you go to a seminar and the ‘trust advisor’ states or advertises that “a licensed insurance agent may contact you.” Annuities can and do fail because the underlying insurance companies can and do fail.

Often, very little of the trust is actually funded. Asset titles need to be changed to the trust title. Missing just $150,000 of an investment that should be in the name of the trust can throw you into probate, incurring fees, delays and publicity. Make no mistake, the goal of a trust mill business is to make money – for itself. The agent could care less what you do with the document when or if you change your assets into the trust name. You will never see him again. The average mill goes out of business in two years, changes its name and starts up again elsewhere.

In setting up or updating your estate, plan to pay a fair price and to do a quality job for your own sake and for the sake of your heirs. Talk to two or three estate planning attorneys and ask some common sense questions before you choose:

Is the attorney’s primary focus on estate planning?

How many years has the attorney been in practice?

Does the attorney assist with properly funding the trust?

Does the attorney have a formal updating plan?

Does the attorney charge hourly or a flat fee?

Ask yourself, “Can I see myself working closely with this attorney?”

It is perfectly normal to search for the “deal”; however, in some situations, it does not pay. Would you like the cheapest doctor to put a stent in your heart? Of course not; your life depends upon the excellence of your physician. Likewise, your estate plan may determine the quality of your remaining life and your legacy to your loved ones. It is not the time to economize! Be certain to read and understand your documents before you sign. You could save yourself a fortune!

The Retirement Concierge offers trust funding assistance as a team member of attorneys, trustees and fiduciaries. We do not offer legal, financial or tax advice. We also wrote “A 10-Step Action Plan for Defining Your Mission,” helping Boomers on the verge of retirement to plan, make and manage life transitions by guiding them through a systematic process of discovery and re-creation where they write their own rules, make their own plans and reinvent their own lives. TheRetirementConcierge.com, (619) 818-8575.

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