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Estate Planning Scams
Jan L. Warner & Jan Collins

Question: My wife and I, along with 30 other seniors, attended a seminar at a local motel this past week. The title of the program was “asset protection” and “probate avoidance” by using living trusts. One of the presenters was an attorney, but the others were not. As the evening wore on, they made more and more promises about what this living trust could do for us. I think this whole thing was a scam, especially when they wanted $2,500 for this trust notebook and power of attorney, which is more than our attorney charged to do our wills. How can you tell if what you are hearing is truth or fiction?

Answer: "Asset protection" for Medicaid and "probate avoidance" for estate matters have been buzz words for years; however, as economic times get tighter, more people are taking the bait. It’s important to remember that planning for incapacity and death involves not only important personal and financial decisions, but also correctly prepared and signed financial and health care powers of attorney, wills, trusts, and other estate planning documents. Otherwise, your documents can be invalid or can cause lasting problems.

With the number of qualified attorneys available today, we believe that seniors who accept the services offered at seminars by living trust mills do so at their own risk. Just recently, a Colorado attorney and others acting with him were convicted of violating that state’s Consumer Protection Act by falsely representing at public seminars that his trust documents would shelter assets so that the seniors could get Medicaid nursing home benefits. Some 700 seniors had paid an average of $2,000 apiece for the bogus documents.

Question: I have been wondering why, when I go to my bank to renew a CD, the customer service people tell me that I would be better off buying an annuity than renewing. They tell me that I can’t lose my principal and will earn more than a CD. I am confused.

Answer: Banks have fast become a large distribution channel for financial products – annuities and mutual funds -- usually associated with brokerage houses and insurance sales forces. Why? Annuity sales generate higher revenue for the bank. In fact, partnering with banks is a goal of most annuity and mutual fund vendors.

Representations that annuities generate greater earnings may be correct in the short run, but deferred variable annuities are really stock market-based investments, meaning that principal will fluctuate. And representations that you will not lose your principal are true if you die, at which time a life insurance component will pay your beneficiaries the exact amount you invested.

But most sales people don’t explain the penalties that are charged if you decide to cash in your annuity early – charges that will repay the commission paid to the bank and other sales costs. While the Federal Deposit Insurance Corporation (FDIC) has established certain consumer protections, many seniors like you are confused.

Responding to the plight of countless seniors who have been victimized by inappropriate sales of annuity products, the National Association of Insurance Commissioners (NAIC) has approved a model regulation requiring that sales representatives not only make "reasonable efforts" to get information about the consumer’s finances and objectives before recommending an annuity, but also have "reasonable grounds" to believe that recommending an annuity is suitable for the senior under the circumstances. For the full text of the NAIC press release click on the link below.

Taking the NextStep: Never purchase a financial product or group legal product until you take the time to secure copies of all documents and evaluate them through your own attorney, tax or financial advisor, or trusted members of your family.

Look at the related articles section to find some of the better “scam avoidance” information.

Click HERE for the NAIC press release.

Need more advice or help with this topic? Click here to get information about taking the "Next Step".
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