Elaine Kolish, Associate Director of the Bureau of Consumer Protection's Division of Enforcement at the Federal Trade Commission presented Commission testimony today before the Senate Special Committee on Aging on the subject of living trust scams.
"The Commission greatly appreciates the Committee's effort to investigate the problems associated with abuses in the marketing of living trusts and to assess the potential scope of living trust scams," the Commission testimony states. The testimony points out that while living trusts can be a legitimate and valuable estate planning tool, scam artists often prey on older Americans' concerns that their estates will be subject to long and costly probate, and misrepresent the costs and benefits of trusts versus wills. "Putting the spotlight on this problem will help alert consumers to the danger they may face by buying living trusts or other estate planning products from strangers who play on their fears that their loved ones will not get the benefit of their estates in a timely fashion," Kolish said.
AARP and Michigan Attorney General Jennifer Granholm recently reported new data showing a 125 per cent increase over the last decade in the number of people aged 50 and older, with incomes of $25,000 or less, who own living trusts. The growth outpaced the living trust ownership growth rate of seniors with moderate and higher incomes, Kolish said. "This is a cause for concern because generally consumers of modest means are the least likely to benefit from sophisticated estate planning services," the testimony noted.
A living trust is an estate planning tool, often viewed as an alternative to a will, in which a person's assets are transferred to the trust during his or her lifetime and distributed at the time of death. A living trust can avoid what could be a costly, lengthy process, the testimony noted, "but whether a living trust is an appropriate estate planning tool depends upon an individual's circumstances and goals, and state laws."
Scam artists usually exaggerate the benefits of living trusts and may falsely claim that locally-licensed attorneys will prepare the documents, according to the testimony. Some unscrupulous businesses advertise seminars on living trusts or send postcards inviting consumers to call for in-home appointments, ostensibly to learn whether a living trust is right for them. In some instances, the offer of estate planning services is a ruse to gain access to consumers' financial information and to sell them other financial products, such as insurance annuities.
The testimony refers to a new Facts for Consumers issued today that warns consumers about living trust scams and how unscrupulous businesses may use marketing for estate planning services as a ruse to gain entrance to consumers' homes and their financial data for the purpose of selling them other investments. The brochure further warns consumers that living trust scam artists often claim affiliation or endorsement with legitimate nonprofit organizations such as AARP, which does not endorse any seller of living trusts. The FTC advises consumers who are concerned about probate and other estate issues to consult a reputable local attorney experienced in wills and trusts or a trusted financial advisor.
In conclusion, the testimony stated that the FTC will distribute its Facts for Consumers through its extensive network of national, state and local contacts, and will pursue its outreach efforts with other organizations that have frequent contact with older Americans. The FTC also advised consumers who believe that they may be a victim of a scam to file complaints with the FTC by calling 1-877-FTC-HELP (877-382-4357) or online at http://www.ftc.gov
The Commission vote to approve the testimony was 5-0.
Copies of the news release, the testimony and the Consumer Alert are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC Matter No. P004209)