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ou’ve worked hard for your money, and made every attempt to be

a conscientious saver. So it’s only natural that you want some

control over what happens to your assets in the event of your

death. At the very least, you probably want to minimize or avoid potential

hassles and headaches for your loved ones.

Estate planning deals with what happens to your assets after you die. Even

if you are a person of modest means, you have an estate — and several strategies to choose from to make sure that your assets are distributed as you wish

and in a timely way. The right strategies depend on your individual circumstances. That is, what is best for your neighbor might not make the most sense

for you.

Living Trust Offers:

How to Make Sure

They’re Trust-worthy
Facts for Consumers

Misinformation and misunderstanding about

estate taxes and the length or complexity of

probate 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 costs or that the distribution of their assets

could be delayed for years. 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 and claim — falsely — that locally-licensed

lawyers will prepare the documents.

Other businesses are advertising living trust

“kits”: consumers send money for these do-ityourself products, but receive nothing in return.

Still other businesses are using estate planning

services to gain access to consumers’ financial

information and to sell them other financial

products, such as insurance annuities.

What’s a consumer to do? It’s true that for

some people, a living trust can be a useful and

practical tool. But for others, it can be a waste of

money and time. What is a living trust, anyway,

and how does it differ from a will? Who should

you trust when it comes to estate planning? And

how can you tell which tools and strategies will

work best for your particular circumstances?

The Federal Trade Commission (FTC), the

government agency that works to prevent fraud,

deception and unfair business practices in the

marketplace, says that it helps to learn the terms

that are used in this aspect of financial planning

before you begin 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. This process

can be costly and time-consuming. Many states

have simplified probate for estates below a certain

amount, but that amount varies among states. If

an estate meets the state’s requirements for

“expedited” or “unsupervised” probate, the

process is faster and less costly.

A trust is a legal arrangement where one

person (the “grantor”) gives control of his property to a trust, which is administered by a

“trustee” for the “beneficiary’s” benefit. The

grantor, trustee and beneficiary may be the same

person. The grantor names a successor trustee in

the event of incapacitation or death, as well as

successor beneficiaries.

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. You can serve as the trustee

or you can select a person or an institution to be

the trustee. If you’re the trustee, you will have to

name a successor trustee to distribute the assets

at your death.

The advantage of a living trust? Properly

drafted and executed, it can avoid probate because the trust owns the assets, not the deceased.

Only property in the deceased’s name must go

through probate. The downside? Poorly drawn or

unfunded trusts can cost you money and endanger

your best intentions.

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.
Facts for Consumers

A living trust is different from a living will. A

living will expresses your wishes about being

kept alive if you’re terminally ill or seriously

injured.

And, the FTC advises, proceed with caution.

Because state laws and requirements vary,

“cookie-cutter” approaches to estate planning

aren’t always the most efficient way to handle

your affairs. Before you sign any papers to create

a will, a living trust, or any other kind of trust:

• Explore all your options with an experienced

and licensed estate planning attorney or

financial advisor. Generally, state law requires

that an attorney draft the trust.

• Avoid high-pressure sales tactics and highspeed sales pitches by anyone who is selling

estate planning tools or arrangements.

• Avoid salespeople who give the impression

that AARP is selling or endorsing their products. AARP does not endorse any living trust

product.

• Do your homework. Get information about

your local probate laws from the Clerk (or

Register) of Wills.

• 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

if the seller is an attorney. 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 (say, at a hotel seminar), the seller

must give you a written statement of your

right to cancel the deal within three business

days.

 The Cooling Off Rule provides that during

the sales transaction, the salesperson must

give you two copies of a cancellation form

(one for you to keep and one to return to the

company) and a copy of your contract or

receipt. The contract or receipt must be

dated, show the name and address of the

seller, and explain your right to cancel. You

can write a letter and exercise your right to

cancel within three days, even if you don’t

receive a cancellation form. You do not have

to give a reason for canceling. Stopping

payment on your check if you do cancel in

these circumstances is a good idea. If you pay

by credit card and the seller does not credit

your account after you cancel, you can dispute the charge with the credit card issuer.

• Check out the organization with the Better

Business Bureau in your state or the state

where the organization is located before you

send any money for any product or service.

Although this is prudent, it is not foolproof:

there may be no record of complaints if an

organization is too new or has changed its

name.

For More Information

To learn more about estate planning strategies,

talk with an experienced estate planning attorney

or financial advisor, and check out the resources

on the following page.
Federal Trade Commission

Bureau of Consumer Protection

Office of Consumer and Business Education

July 2000

F C EDERAL RADE OMMISSION T FTC OR HE ONSUMER

1-877-FTC-HELP www.ftc.gov

Facts for Consumers

AARP: 1-800-424-3410; www.aarp.org. Ask

for a copy of Product Report: Wills & Living

Trusts. AARP does not sell or endorse living

trust products.

The American Bar Association, Service

Center, 541 N. Fairbanks Ct., Chicago, Ill.

60611; 312-988-5522; www.abanet.org/

publiced/publicpubs.html

Council of Better Business Bureaus, Inc.,

4200 Wilson Blvd., Suite 800, Arlington, Va.

22203-1838; 703-276-0100; www.bbb.org

The National Academy of Elder Law

Attorneys, Inc., 1604 North Country Club

Road, Tucson, Ariz. 85716; 520-881-4005;

www.naela.org

The National Consumer Law Center, Inc.,

18 Tremont St., Ste. 400, Boston, Mass. 02108-

2336; 617-523-8010; www.consumerlaw.org

Where to Complain

The FTC works for the consumer to prevent

fraudulent, deceptive, and unfair business

practices in the marketplace and to provide

information to help consumers spot, stop, and

avoid them. To file a complaint or to get free

information on consumer issues, call toll-free,

1-877-FTC-HELP (1-877-382-4357), or use the

complaint form at www.ftc.gov. The FTC enters

Internet, telemarketing, identity theft, and other

fraud-related complaints into Consumer Sentinel,

a secure, online database available to hundreds of

civil and criminal law enforcement agencies in the

U.S. and abroad.