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Is a Living Trust for Me?

Living trusts have become a hot topic. Should you have one? Minnesota Attorney General Lori Swanson says to be careful.

“You should steer clear of ‘living trust mills,’ which hold themselves out as estate planning specialists but churn out boilerplate documents for a high fee, all to get their foot in the door to sell you annuities or insurance products later on that might not be suitable for your needs,” Swanson wrote on her website.

Consumer News reports in “Consumers cautioned about ‘living trust mills'” that the AG says people pushing living trusts are often nothing more than insurance agents or people working for insurance agents. These guys may charge you a lot of money for a boilerplate trust, but they really want to make a bigger sale later, says the AG.

A living trust is a legitimate estate planning tool, and—similar to a will—it is created when you are still alive. A living trust lets you transfer assets to the trust and, if done properly, may transfer those assets to heirs without probate. A living trust is revocable, which makes it very flexible. You, or someone you designate, manages the assets in the trust, which can be bought or sold but always have to stay in the name of the trust.

Living trusts are very complex legal documents—one-size-fits-all doesn’t work. To set up a living trust, the Attorney General advises families to work with an experienced estate planning attorney. But that’s not how many folks get sucked into the mill process. These outfits will offer a free dinner to hear a presentation where the so-called expert scares the attendees with horror stories of the consequences of dying without a living trust.

The AG says this expert will attempt to then schedule in-home appointments with audience members, during which he or she will gather extensive financial information about potential clients and try to earn their trust. The result may be attempting to sell an overpriced living trust, but the big push is to sell an annuity or insurance policy.

“Annuities are complex products,” Swanson says. “If you move your money from another product, you may have to pay fees or penalties. Some long-term annuities may lock up your money for more than ten years, subjecting you to penalties if you need to access your money for living expenses.”

Annuities can also have complicated interest-crediting provisions, which can be very confusing.

Best advice: avoid living trust mills and anyone who uses high pressure sales tactics, including fear, to get you to use any legal document or financial product that you don’t understand. A qualified estate planning attorney will be able to discuss whether or not a living trust is suitable for your family.

Reference: Consumer News (April 22, 2016) “Consumers cautioned about ‘living trust mills'”

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