FTC testifies to Sentate on living trust scams

The Federal Trade Commission presented its testimony on living trust scams to the U.S. Senate's Special Committee on Aging July 11.

"It is important to note at the outset that living trusts can be legitimate and valuable estate planning tools," said Elaine Kolish, associate director of the Bureau of Consumer Protection's Division of Enforcement at the FTC. "However, scams involving living trusts raise serious and growing concerns."

These scams target older Americans, preying on their concern that their estates will be subject to long and costly probate, Kolish said.

Such scams "involve misrepresentations about the costs and benefits of trusts vs. wills and that local attorneys will create the trust documents."

Scams also include advertising do-it-yourself living trust kits which consumers pay for but never receive, and using estate planning services to gain access to consumers' financial information and sell them other financial products, such as insurance annuities.

The FTC recommends that, before signing any papers to create a will, a living trust or any other kind of trust, you should:

Explore all your options with an experienced and licensed estate planning attorney or financial advisor.

Generally, state law requires that an attorney draft the trust.

Avoid high-pressure sales tactics and high-speed sales pitches by anyone who is selling estate planning tools or arrangements.

Avoid salespeople who give the impression that AARP is selling or endorsing their products. AARP does not endorse any living trust product.

Do your homework. Get information about your local probate laws from the clerk (or register) of wills.

If you opt for a living trust, make sure it's properly funded that is, that the property has been transferred from your name to the trust.

If the property transfers aren't done properly, the trust will be invalid and the state will determine who inherits your property and serves as guardian for your minor children.

Remember the Cooling Off Rule. If you buy a living trust in your home or somewhere other than the seller's permanent place of business (say, at a hotel seminar), the seller must give you a written statement of your right to cancel the deal within three business days.

The Cooling Off Rule provides that during the sales transaction, the salesperson must give you two copies of a cancellation form (one for you to keep and one to return to the company) and a copy of your contract or receipt.

The contract or receipt must be dated, show the name and address of the seller, and explain your right to cancel.

You can write a letter and exercise your right to cancel within three days, even if you don't receive a cancellation form. You do not have to give a reason for canceling.

Check out the organization with the Better Business Bureau in the state where the organization is located before you send any money.

Although this is prudent, it is not foolproof: there may be no record of complaints if an organization is too new or has changed its name.