Legal Service Developer Program
Living Trust Scams: Montana Seniors Beware
by: Rick Bartos
The popular television series Dragnet introduced us to Sergeant Friday. A constant fighter of crime, Sergeant Friday was always able to protect the innocent by asking for, "Just the facts." Here are a few facts about living trusts.
What is a living trust?
A living trust is an alternate way to own, manage and dispose of your property. It is much like a bank account in that you cannot see or touch the trust. The trust owns the property you transfer into it while you or someone you choose takes care of that property.
The living trust is created by a trust document. The document states who is creating the trust (grantor), who will manage the trust (the trustee), who will benefit from the trust (the beneficiary), and what property will become part of the trust.
You are the grantor of your living trust. You decide which pieces of your property should become part of the trust body. Your trust can include real estate, bank accounts, stocks, bonds and other personal property items. You decide if you want to transfer all or only some of your assets into your trust.
You may also be the trustee of your living trust. Being the trustee allows you to exercise full control of the property you have transferred into the trust. If you do not want to manage your living trust, you may appoint another person or a financial institution to do so for you.
Can I avoid probate with a living trust?
In many instances the answer is yes. However, the cost of buying a living trust and transferring your assets into the trust may well exceed any probate costs you may encounter.
Your assets must be properly transferred into the trust. If they are not, you might not avoid probate. Even if you have a proper trust, you still need a will to cover property you might have missed or which is later acquired and never transferred into the trust.
In many instances, if your property is held in joint tenancy with right of survivorship (husband and wife) you will not have to probate any property when the first spouse passes away. The surviving spouse has no legal need to probate. If the estate is less than $600,000 in value there will be no estate or inheritance taxes. Do not be misled by probate delay and fee horror stories. Not all individuals need a trust - not all probates are expensive or time consuming.
Can a living trusts save me estate or inheritance taxes?
No.
Can a living trust allow me to qualify for Medicaid if I were to enter a nursing home and thereby save my assets?
In virtually every instance the answer is no. It is unlikely a living trust will save any assets from the spend-down requirements to become Medicaid eligible.
What are the expenses of a living trust?
- Cost of having the trust instrument drawn up to establish the trust.
- Paying the trustee's fee.
- Paying for transferring the assets into the living trust.
Why should I consult an attorney?
- Licensed Montana attorneys must follow strict ethical standards. They are subject to review for their actions by the Commission on Practice and ultimately the Montana Supreme Court.
- Montana attorneys have at least 7 years of higher education. They are required to complete rigorous legal education training and testing.
- In consulting an attorney, you establish an attorney-client relationship. The information you share with the attorney must be kept confidential. You continue to receive the services long after the trust document was created.
If you are reluctant to approach an attorney, your local Area Agency on Aging office has trained volunteer counselors to assist. Also your bank trust officer or a licensed or certified public accountant would be excellent resource people to assist you.
Many trust kits and commercial packages are sold by unlicensed persons claiming to be insurance salespersons or financial planners. They walk the line of unfair trade practices and the unauthorized practice of law. They exaggerate the time and cost considerations of probate. And because they are neither licensed nor regulated, they may not keep your financial information confidential.
Why should I be cautious about the commercial trust packages?
- These salespersons are not regulated by any local or state government consumer office.
- Trust kits do not allow the trust to be tailored to your specific needs and goals. You receive no individualized legal or estate planning advice.
- Commercial trust packages will more likely cost you more than it costs to have a lawyer establish a living trust.
- Trust kits and commercial trust packages require you to transfer your property into your trust. This can be a time consuming and complicated task, involving the completion of new deeds and transfer documents. If you have an attorney establishing your trust the attorney can assist in transferring your property into your trust.
Where can I get the facts on living trusts?
Montana Office on Aging: 1-800-332-2272
Montana Attorney General Office: (406) 444-2026
Montana State Bar Elder Assistance Committee (406) 442-7660
REMEMBER: Determining if you really need a trust is the first step; correctly identifying your assets and tailoring the trust is the second step; and do not forget the third and critical step, legally and properly transferring assets into the trust.
They're your assets. It's your future. Be careful.
