The Truth About Living Trusts
By: Education & Outreach | Source: AARP.org
Helpful Tips
You may have gotten a call, a visit to your door, or a postcard offering you more information on living trusts. You might have been offered a free lunch seminar. You might even have seen a reference to AARP in the marketing materials. If any of this happens to you, keep two things in mind:
- AARP does not sell or endorse any living trust product, does not work in cooperation with any company that promotes or sells them, and does not sell or give its membership lists to such companies.
- There's no such thing as a free lunch. A living trust may be a useful tool in your estate planning. However, aggressive
salespeople often make it sound more useful than it really is.
Just like a will, a revocable living trust is a written document that lets you direct how your property
will pass after your death. Unlike a will, it also directs how you want your property managed during any disability.
To establish a trust, the person creating it (called the creator, grantor or settlor) writes a trust document and transfers property into the trust. The trust does not take effect until the creator transfers ownership of property to the trust. This transfer is known as “funding” the trust.
A living trust takes effect during the creator’s lifetime. Creators often name themselves as the initial trustee responsible for managing the trust. This allows the creator to keep control over the trust property during his or her lifetime.
Why a Living Trust?
A properly created living trust can be helpful if you need help managing assets during a disability (and a power of attorney won’t work), if you have children or grandchildren with special needs, or own real estate in more than one state. It is also just one of several ways to avoid going through probate. (Probate is the legal process to prove that a will is valid.)
If you think a living trust is for you, get advice from an estate planning attorney. You can call your
local bar association lawyer referral service for the name and phone number of an attorney who specializes in estate planning.
Why NOT a Living Trust?
Living trusts are not the right estate planning tool for everyone. Several reasons you might consider a living trust are listed above. If you don’t fall into one of those categories, you might be better off with a will. Aggressive salespeople might try to convince you otherwise. But a qualified estate planning attorney can help you figure out what would work best for you.
AARP research shows that the greatest growth in sales of living trusts is to people who are least likely to need one. Living trusts are not the solution that salespeople make them out to be. Take your time. Do your homework. And learn to spot the scams.
What’s the scam?
There are several, unfortunately.
The claim: A living trust will preserve your legacy to your loved ones by helping you avoid probate
costs and estate taxes.
The truth: Most people don’t need to worry about probate or estate taxes. They’re often not as bad as salespeople say they are. Most living trusts aren’t designed to avoid estate taxes. And there many easier, cheaper ways to avoid probate than a living trust.
The claim: The living trust documents (or kit) sold by the salesperson are prepared by an attorney.
The truth: Pre-printed, generic forms are often passed off as custom-made documents. There is
often no attorney involved. The package may be overly expensive. The forms may not meet the
requirements of state law. And they often don’t include clear instructions on how to fund the trust.
Poorly drawn or unfunded trusts can cost you money and endanger your best intentions.
The claim: The free lunchtime seminar will give you good, objective information on living trusts.
The truth: These seminars (or home visits) are designed to sell you a living trust. Salespeople often inflate the costs involved in settling an estate, and promote living trusts as THE solution. They are often aggressive in their sales tactics, pressuring you to buy right away (or risk losing the “good” deal).
The claim: A card arrives, saying that a recent AARP study finds that the probate process is outdated and costs Americans billions each year.
The truth: AARP has never given permission for living trust marketers to use its name. Responding to this card may make you a target for a hard sell from marketers, or possibly a scam. If you receive a card saying something like this, please send the card to:
AARP Consumer Protection
601 E Street, NW
Washington, DC 20049
We may not be able to respond, but your response will help us keep fraudulent marketers
from using AARP’s name.
And the scams don’t stop with just living trusts. In fact, salespeople will often try to get you to fill out forms that disclose your financial assets. Once they’ve see your finances, they often recommend different investments, usually insurance-type products like annuities. Their aim is not to meet your estate planningor investment needs. Their aim is to earn high commissions from the sale of these products.
Remember: If you want to know if a living trust is right for you, get advice from an estate planning attorney.
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