This guide is intended to provide general guidance only. It is not a substitute for the advice of a lawyer.
If you are age 50 or older, you should take
special care when creating living trusts. Your
age group is often a target of salespeople whose
goal is to sell you something without carefully
analyzing your needs.
It is easy enough to become a victim. Living
trust sales are a growing area of consumer
fraud. Con artists make millions of dollars
every year selling unnecessary trusts. Each year
thousands of consumers lose from $500 to
$10,000 through the purchase of living trusts.
Unfortunately, families often face greater costs
after the consumer’s death because of
problems with poorly drafted or inappropriate
trusts.
To protect yourself, follow these guidelines:
1. Take time when making your decision.
Do not fall victim to high-pressure “act
immediately” sales tactics.
2. Seek the advice of someone trustworthy
and knowledgeable. Contact your accountant,
estate planning attorney, banker, or financial
advisor. Remember, only a licensed Texas
attorney can legally assist you in creating a
trust.
3. If you conclude that a trust may be right
for you, deal directly with a licensed Texas
attorney who has substantial expertise in
estate planning. If the attorney is board
certified in estate planning and probate law by
the Texas Board of Legal Specialization, he or
she is presumed to have this expertise (though
an attorney does not need to have this
designation to be qualified to do your estate
planning work). Membership in the American
College of Trust and Estate Council is also a
good indication that the attorney has the
required expertise to assist you.
FRAUDULENT AND MISLEADING
STATEMENTS USED IN LIVING TRUST SCAMS
Con artists promote their business by making
false or incomplete statements about the
probate process, guardianships, and the
taxation of estates. Such statements include:
1. “Living trusts save taxes. Your estate can
be reduced by a 40 percent death tax.”
MISLEADING. Most Texans’ estates will face
no death taxation at all because estate tax is
imposed only if your estate is valued at over
$11.58 million for deaths in 2020. If your
estate is taxable, a will can accomplish exactly
the same tax savings as a trust at a much
cheaper cost.
If the value of your assets could exceed the
applicable limitation, you should see an
estate-planning attorney to minimize your
potential estate tax liability regardless of who
receives your property. However, a living trust
is not required to take advantage of other
techniques to minimize estate tax liability,
such as portability, in which the surviving
spouse uses the deceased spouse’s unused
estate tax exemption.
2. “Living trusts will help you qualify for
public assistance benefits.”
FALSE. A living trust will not help you qualify
for public assistance benefits, particularly
nursing home Medicaid benefits.
3. “Living trusts help you avoid contested
wills.”
MISLEADING. Because a “trust” and a “will”
are separate legal documents, a trust is not
subject to a will contest. However, just like
wills, trusts are subject to attack on the basis of
lack of capacity, undue influence, and fraud.
4. “Living trusts help you avoid your
creditors.”
FALSE. During your lifetime, assets in a living
trust are subject to the claims of your
creditors. After death, these assets are subject
to the claims of your estate’s creditors.
5. “Living trusts avoid the expense of a
guardianship.”
MISLEADING. While a living trust might be
helpful to avoid the expense of a guardianship
in case of your future incapacity, there is no
guarantee. A durable power of attorney may
be a simpler and less costly way to achieve the
same goal. The key is to work with a Texas
attorney familiar with estate planning to assist
you in determining which instrument is right
under your particular circumstances. Also,
Texas has adopted a “Declaration of Guardian
in the Event of Later Incapacity or Need of
Guardian” which allows you to designate your
preference of the individuals to be your
guardian if you are later incapacitated. The
Declaration also allows you to disqualify
persons you do not want to serve as your
guardian.
6. “Attorneys charge from 3 percent to 10
percent or more to probate your estate.”
FALSE. If your family hires an attorney, his or
her fee may be based upon an hourly charge or
a flat fee. Rarely do attorneys charge a
percentage of your estate and if they do, the
rate would be considerably less than 3 percent.
Most attorneys charge an hourly rate for their
work.
7. “Probate takes years to complete.”
MISLEADING AND VERY UNLIKELY.
Nontaxable probate estates generally take a
year or less to complete. There are rare
circumstances where families and/or the IRS
fight for an extended period after a death.
Such disputes can cause delays in the
administration of either a probate or a living
trust. In most circumstances the
administration of a living trust is no more
time efficient than the administration of a will
in probate.
8. “Probate requires excessive time and
money.”
FALSE. Texas has adopted a simplified probate
process under the Texas Estates Code. These
independent administrations, which account
for more than 80 percent of Texas probates,
involve only one court hearing and the filing
of an inventory or an affidavit in lieu of
inventory. Independent administrations can
be accomplished through a properly drafted
will. They may not be available if there is no
will. An even simpler procedure, probating a
will as a muniment of title, may also be
available in certain situations.
9. “Everyone should have a living trust.”
FALSE. While a living trust is appropriate for
some people, the cost of creating, funding and
administering a living trust outweighs the
benefit for many people. It is important to
decide what your needs are before creating a
living trust. For example, the living trust can
be an important device to enable a person to
obtain assistance in managing assets. Many
people lack the capacity to manage their assets,
or have lost that ability through ill health. For
people who own out-of-state property, the
living trust can help avoid the need to probate
their will in that state. If neither of these issues
applies to you, however, a living trust may not
be an appropriate document for you. Note
that under the law of some states, probate is
complicated and expensive so that most
people benefit from a living trust. You are
fortunate to live in Texas, which has one of the
most economical and efficient probate systems
in the United States.
10. “The living trust is the only way to
avoid probate.”
FALSE. If your goal is to avoid probate, there
are several ways to do so. Joint tenancy with
rights of survivorship and multiple party
accounts with financial institutions are
common and inexpensive methods of
avoiding probate. However, always consult
with an attorney before proceeding with these
options, as they may conflict with your
current estate planning or cause undesired side
effects.
WHAT YOU CAN DO TO PROTECT YOURSELF
It is very difficult to get your money back if
you are cheated in a living trust scam. So
before you buy, and better yet, before you
allow a salesperson in your home, remember:
1. Always take sufficient time to make your
decision.
• Legitimate advisors understand when you
want more information about their services
or products.
• Be sure to talk with someone knowledgeable
whose advice you value when considering a
trust.
• Never respond to an offer you do not
thoroughly understand.
• Avoid buying on impulse or succumbing to
sales pressure to “act now.”
2. If you conclude that a trust may be right
for you, deal directly with a licensed Texas
attorney who has substantial expertise in
estate planning.
• Be sure you are working with someone with
the necessary training and education.
• If a trust is right for you, an attorney with
knowledge of Texas law should draft it.
The laws that apply to trusts vary from state to
state. Forms, kits, computer software programs,
and websites may not be tailored to the
requirements of Texas law. A licensed Texas
attorney with expertise in estate planning
should prepare, or at least review, your living
trust. Also, a trust prepared by an attorney will
generally cost less than the prices charged by
trust salespeople, and the attorney’s malpractice
coverage may provide recourse in the event of
error or unforeseen circumstances.
HOW PEOPLE BECOME VICTIMS
OF LIVING TRUST SCAMS
Con artists make false and misleading
statements to older people through:
1. telemarketing and mail solicitations;
2. door-to-door sales;
3. “free” seminars and workshops, and;
4. advertisements.
Often con artists attempt to meet in your
home through offers of a free living will, a free
power of attorney, or a free estate analysis.
Many also offer unnecessary partnerships,
limited partnerships, family partnerships, and
limited liability companies.
SB0161E-0716 44049 4/20
Prepared as a public service by the
Texas Young Lawyers Association
and distributed by the State Bar of Texas.
This pamphlet and other free legal resources
can be found online at texasbar.com/resources.
For additional printed copies please contact
the State Bar of Texas Public Information Department
via email at pamphlets@texasbar.com
or by calling 800-204-2222, ext. 1800
If you believe that you have been a victim of a
con artist or a living trust salesperson, contact
your local law enforcement agency.
If you believe you have been a victim of an
attorney acting unethically, call the State Bar
of Texas grievance information hotline at
800-932-1900 or determine if filing a
grievance with the State Bar is the right option
at texasbar.com/grievance.
While non-attorneys are not subject to
State Bar rules, they may be practicing law
without a license. To contact the Texas
Unauthorized Practice of Law Committee,
email info@txuplc.org, or visit txuplc.org to
file a complaint about unauthorized practice
of law.