Imagine spending thousands of dollars on an estate plan to protect loved ones, only to find that no true protection exists. Unfortunately, this scenario happens on a regular basis to individuals who are victims of estate planning schemes. According to a report conducted by the U.S. Consumer Financial Protection Bureau of people ages 50 and over, victims of financial fraud lose $34,200 on average to unscrupulous scammers.
In some instances, the scams are discovered before the victims die. Though the family members may have lost the money involved, the victim can still amend the legal documents to make them valid and accurate. Unfortunately, many individuals do not discover the scam in time. As a result, a family’s devastation during a time of grieving is compounded when they discover the scam. To avoid becoming a victim of estate planning fraud, it is important to identify the different forms that estate planning fraud may take, the signs to watch out for, and the steps to take when seeking competent estate planning counsel.
Older adults, ages 50 and over, tend to be the targets of estate planning fraud. They may be more susceptible to these schemes due to a variety of reasons, including the following:
- Older adults have acquired more significant assets than those in subsequent generations
- Older adults are at ages where death is increasingly likely
- Older adults may experience biological changes that impact decision-making abilities
Many of these individuals are also unfamiliar with the estate planning process and therefore unable to identify deviations from truthful and normal practices.
A scammer often preys upon the fears of these older individuals by creating unnecessary anxiety. The scammer often paints a wildly exaggerated picture of the risks the victim may face if the victim chooses not to work with the scammer, including notions that a “death tax” (which is likely not even applicable to the person in question) would be substantial. The scammer may also represent that the financial products offered by the scammer are the only possible solutions (despite the existence of other options that may satisfy the individual’s needs and cost less). The doom and gloom messaging matched with their specific heroic product offerings leave the victim feeling as though there is no choice but to purchase these solutions.
Types of Scams
Estate planning scams do not have a one-size-fits-all approach. These scams vary in delivery, outcome, timeline, and approach. However, trust mills are probably the most common form of estate planning scam.
Trust mills are companies, usually composed of nonlawyers, that create a low-cost trust that they replicate repeatedly for unsuspecting victims. The problem is that the trusts provide little to no customization to actually protect senior consumers. The main objective with most trust mill operations is to gain access to information about the individual’s accounts and property. Once that information is acquired, these trust mills offer additional financial products and receive a significant commission for each additional product sold.
To avoid becoming another victim, there are a few steps you can take:
- Investigate direct solicitations. Perpetrators of estate planning schemes often solicit directly using presentations, mailers, door-to-door sales, and telemarketing. These companies often have names that sound very legitimate and can easily be confused with more established organizations like AARP. If someone contacts you regarding your estate plan and is not a licensed attorney, question that solicitation. Search for the company online to verify its reputation and the type of work completed.
- Ask about qualifications. As an estate planning consumer, questions are your best friend. You should feel comfortable asking any service provider about their professional qualifications. First, find out whether the individual is actually an attorney. A common trait that most of these fraudulent schemes share is that the individuals providing the advice are not licensed attorneys. Some may say that they are advisors or consultants, or that they are associated with an attorney or law firm. A fraudulent individual will often lack legal experience and credentials, will continue to try to provide a legal solution, and then will upsell you on some type of insurance or annuity. Ensure that you are speaking with a vetted and experienced estate planning attorney who is licensed to practice law in your state.
- Purchase additional products carefully. Additional products in these contexts are consistently used to swindle older people by having them invest in items with little pay-off that provide ridiculous commissions for these sales agents and fraudsters. Additionally, be cautious of trusts described as “pure,” “constitutional trusts,” or “pure equity trusts,” as well as how instruments such as promissory notes are used.
- Report suspicious activity to local officials. Contact your local law enforcement officials if you suspect that you have encountered fraudulent activity to verify whether there is reason for concern. You can also contact the national fraud hotline at 1-800-876-7060 to log your concern and get help so you can avoid further involvement with fraudulent organizations.
I Can Help
Genuine estate planning can be a complex yet highly rewarding journey. Meeting with a trusted and experienced attorney who knows how to help you navigate the various options that exist for your situation is invaluable so that you can design an estate plan that actually protects you and your loved ones. Schedule a call with my office today.
 Katherine Skiba, Older Americans Hit Hard by Financial Fraud, AARP (Feb. 28, 2019) https://www.aarp.org/money/scams-fraud/info-2019/cfpb-report-financial-elder-abuse.html.