A noticeable problem within the estate
planning field is the proliferation of living trust mills. The following are
some questions that address this problem.
1. What is a trust mill?
A trust mill is an elaborate scam
concocted by nefarious insurance agents that seek to deceive consumers into
purchasing costly and largely unneeded financial products, namely annuities,
through the guise of providing them with a living trust.
In other words, the allure of purchasing
a living trust serves as the Trojan horse, and once the sales agent has gained
access to the consumer, he or she then seeks to sell largely useless financial
products to the unwitting consumer.
2. How does a trust mill work?
A trust mill company will publicize a
free living trust seminar at a local diner, hotel or inn in a local newspaper.
Since there are legal advantages for writing a trust, such as the avoidance of
probate and estate taxes, consumers are naturally intrigued by this. Also, the
allure of a free meal or beverage cannot be understated as well. Consequently, interested
consumers will attend the seminar.
The seminar is almost always hosted by
an insurance agent who uses the title "trust advisor," "senior estate
planner" or "paralegal" instead of insurance agent. These
aforementioned titles have basically no legal value to them because these
titles do not indicate a license to practice law independently. It is simply a
facade to deceive consumers into believing that the insurance agent has the
requisite legal expertise. Regardless, these sales agents sign up curious consumers
at the seminar who wish to write a living trust. The sales agent then makes an
initial visit to the consumers’ home to gather the necessary financial
information to write the trust. The sales agent passes this information on to a
person to write the actual trust document. Some trust mills actually have
attorneys write the living trust while others do not. The sales agent then
takes the trust document to the consumer’s home for execution. At this point,
the crucial part of the scam takes place.
Armed with the consumer’s financial
information, the sales agent strongly encourages the consumer to consider
purchasing financial products from them, which are invariably annuities. The
sales agent will often say whatever is necessary to complete the sale, or lying.
The reason why the sales agent wants the consumer to purchase an annuity is
because of the high commissions the sales agent will receive for selling an
annuity. Meanwhile, in almost all cases, the annuity the sales agent is
offering is the worst possible investment for the consumer. For reference, an
annuity is basically a financial arrangement where the investor is paid a fixed
sum of money for a fixed number of years for making an initial lump-sum
investment. While it might sound financially attractive, the annuities that
these sales agents offer often have high up-front costs and severe early
withdrawal penalties. The end result is that the consumer purchases an
expensive and superfluous financial product, while the sales agent walks away
with a hefty commission. Or in the other words, the consumer loses and the
sales agent wins.
3. How can I spot a trust mill?
There are a couple of tell-tale signs
for spotting a trust mill. First, the seminar is hosted by a non-attorney.
Second, the flyer for the seminar will mention how an insurance agent may
deliver the trust documents to the consumer. If you see either of these
variables the seminar is probably a trust mill.
4. How prevalent are trust mills?
Trust mills are prevalent here in
California as well as the United States. For example, in 2007, the California
Attorney General reached a $7.2M settlement with American Investors Life
Insurance Company, Family First Insurance Services, and Family First Advanced
Estate Planning for their roles in selling high-priced annuities to seniors.
5. Who should I contact if I have been
victimized by a trust mill?
You should contact your district
attorney’s office and the CA Department of Insurance consumer hotline at
1-800-927-4357.
