Slam the scams: guarding your clients against trust mills and annuity scams.

• Author: Jaffer, David
• Position: Estate planning

Sales agents claiming to be "estate planning experts" are selling trusts and annuities and victimizing consumers, particularly senior citizens.

While the specifics of these enterprises vary, these scams generally have two main objectives:

* Sell or replace the consumer's existing investments, frequently focusing on the annuities and life insurance; and

* Persuade the consumer to buy the estate planning documents proposed by the sales agent.

Both objectives result in pecuniary benefits to the agents involved. While prosecution is on the rise against companies and individuals who perpetrate these scams, this offers little solace to the victims.

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Trust Mill & Annuity Scam

"Living trust mill" is often used to describe a company engaging in an unethical sales practice. Most of these companies solicit customers through direct-mail campaigns, newspaper advertisements, telemarketing or by conducting estate planning seminars where seniors gather.

While this doesn't mean that everyone who engages in these activities is unscrupulous, care should be taken to ensure that one is dealing with a reputable firm.

Similarly, an annuity scam process typically begins through relentless marketing efforts by an insurance agent. The agent schedules initial appointments with consumers under the pretext of helping them establish a formal estate plan. The sales agent will generally schedule a second meeting to sign and notarize the estate planning documents proposed during the first meeting. In the second meeting, the sales agent will use the information uncovered during the previous meeting to convince customers to make changes to their investments.

During these meetings, the agent selling the annuity may fail to disclose early withdrawal penalties that may be incurred upon transferring the existing assets into an annuity. There can be adverse tax consequences to the proposed transaction that aren't discussed; and the sales agent may also fail to disclose that the annuity is not 100 percent safe and not fully guaranteed by the state of California.

The Value of Professional Advisers

A majority of Americans devote a significant part of their working years to the accumulation of financial resources with the hope of providing financial security for an increasingly longer life span. Decisions relating to the distribution of the assets upon death must also be planned and executed with great care, and with the aid of competent counsel.

When sales...