Make sure trusts are trustworthy
- By Milt x_Zall
- Jun 15, 2001
You've worked hard for your money and have made every attempt to be a conscientious
saver. So it's only natural that you want some control over what happens
to your assets in the event of your death. At the very least, you want to
minimize or avoid potential headaches for your loved ones.
Estate planning deals with what happens to your assets after you die.
Even if you are a person of modest means, you have an estate. And you have
several strategies to choose from to make sure that your assets are distributed
as you wish and in a timely way. The right strategies depend on your individual
Watch Out for Scams
Misinformation and misunderstanding about estate taxes and the length
or complexity of probate provide the perfect cover for scam artists, who
have created an industry out of older people's fears that their estates
could be eaten up by costs or that the distribution of their assets could
be delayed for years.
Some unscrupulous businesses are advertising seminars on living trusts
or sending postcards inviting consumers to call for in-home appointments
to learn whether a living trust is right for them. In these cases, it's
not uncommon for the salesperson to exaggerate the benefits or the appropriateness
of the living trust and claim falsely that locally licensed lawyers
will prepare the documents.
Other businesses are advertising living trust "kits" in which consumers
send money for these do-it-yourself products but receive nothing in return.
Still other businesses are using estate-planning services to gain access
to consumers' financial information and to sell them other financial products,
such as insurance annuities.
What's a consumer to do? It's true that for some people, a living trust
can be a useful and practical tool. But for others, it can be a waste of
money and time.
What Is a Living Trust?
What is a living trust, anyway, and how does it differ from a will?
Who should you trust when it comes to estate planning? And how can you tell
which tools and strategies will work best for your particular circumstances?
A trust is a legal arrangement where one person (the "grantor") gives
control of his property to a trust, which is administered by a "trustee"
for the benefit of a "beneficiary." The grantor, trustee and beneficiary
may be the same person. The grantor names a successor trustee in the event
of incapacitation or death, as well as successor beneficiaries.
A living trust, created while you're alive, lets you control the distribution
of your estate. You transfer ownership of your property and your assets
into the trust. You can serve as the trustee or you can select a person
or an institution to be the trustee. If you're the trustee, you will have
to name a successor trustee to distribute the assets at your death.
Properly drafted and executed, a living trust can avoid probate because
the trust owns the assets, not the deceased. Only property in the deceased's
name must go through probate. The downside? Poorly drawn or unfunded trusts
can cost you money and endanger your best intentions.
A living trust is different from a living will. A living will expresses
your wishes about being kept alive if you're terminally ill or seriously
Proceed with caution
Because state laws and requirements vary, "cookie-cutter" approaches
to estate planning aren't always the most efficient way to handle your affairs.
So, before you sign any papers to create a will, a living trust or any
other kind of trust:
* Explore all your options with an experienced and licensed estate planning
attorney or financial adviser. 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.
Get information about your local probate laws from the clerk (or register)
of wills. If someone tries to sell you a living trust, ask if the seller
is an attorney. Some states limit the sale of living trust services to attorneys.
* Make sure your living trust is properly funded. That is, the property
has been transferred from your name to the trust. If the 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, the seller
must give you a written statement of your right to cancel the deal within
three business days. You do not have to give a reason for canceling. Stopping
payment on your check if you do cancel in these circumstances is a good
idea. If you pay by credit card and the seller does not credit your account
after you cancel, you can dispute the charge with the credit card issuer.
* Check out the organization with the Better Business Bureau before
you send any money for any product or service. 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.
Zall, Bureaucratus columnist and a retired federal employee, is a freelance
writer based in Silver Spring, Md. He specializes in taxes, investing, business
and government workplace issues. He is a certified internal auditor and
a registered investment adviser. He can be reached at [email protected].