Living Trusts

Misinformation and misunderstanding about living trusts 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 expensive probates and taxes. 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.
To prevent deception, fraud and unfair practices, the Better Business Bureau, along with the Federal Trade Commission advises consumers to learn the terms that are used in this aspect of financial planning before beginning conversations about it. For example:

Probate is a legal process that usually involves filing a deceased person's will with the local probate court, taking an inventory and getting appraisals of the deceased's property, paying all legal debts, and eventually distributing the remaining assets and property. Probates can be costly and time-consuming. Many states have simplified probate for estates below a certain amount, but that amount varies among states.

A trust is a legal arrangement where one person gives control of his/her property to a trust, which is administered by a "trustee" for the "beneficiary's" benefit.

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. If a living trust is properly drafted and executed, it can avoid probate because the trust owns the assets, not the deceased.

A will is a legal document that dictates how to distribute your property after your death. If you don't have a will, you die intestate, and the law of your state determines what happens to your estate and your minor children. The probate court governs this process.

Before you sign any papers to create a will, a living trust, or any other kind of trust:

• Explore your options with an experienced and licensed estate planning attorney or financial advisor
• Avoid high-pressure sales tactics and high-speed sales pitches by anyone who is selling estate planning tools or arrangements
• 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 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
• If someone tries to sell you a living trust, ask about his or her background and profession. Some states limit the sale of living trust services to attorneys
• 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
• Always check out a company with the Better Business Bureau before doing business with them. You can do this free of charge at www.bbb.org.

This information is general in nature and is not intended as a reliability report on any company, product, or service.