Beware: Estate Planning Scams Are Knocking at Your Door
Over the years, people have been increasingly concerned about the cost of legal services. Without question, there are a number of lawyers and law firms who have abused the public’s trust by overcharging for wills and other estate planning services. This abuse of trust, coupled with an uncertain economy, has compelled people to hope to ensure that they are getting a fair deal. Unfortunately, a number of predators have arisen to take advantage of the public by using two estate planning scams.
The worst scam is the sale of living trusts in New Jersey. Living trusts are vehicles designed to avoid probate, which is the court’s supervision of the estate administration process. In many states, probate laws are onerous and these trusts are quite beneficial. New Jersey residents, however, live in arguably the easiest probate state in the country. The only enforceable requirement is the admission of the will to probate, which can be handled by the Executor without any cost beyond the filing fee with the county surrogate, which typically ranges between $150 and $200.
These trusts are frequently sold by companies who outright lie about their benefits and the disadvantages of a will. They typically induce people to get acquainted with them through mailers and/or free dinner offers. They then tell them that their finances will be in ruin if all they have is a will. They fabricate, claiming that the executor of an estate gets a 10% commission, when it’s actually 5% of the first $200,000, 3.5% of the next $800,000 and 2% of the balance. The fee is discretionary, too. They state that the attorneys who write wills must be used as their Executors, and that the attorneys receive mandatory outrageous fees. The number I frequently hear used is $60,000. However, this is false, because legal assistance is not required to administer an estate, and any fees required are usually the result of the estate being taxable, not because of probate. They also claim that estates get tied up due to probate. In New Jersey, that is absolutely false. Ten days elapse between the date of death and the probate of the will. That is all.
The trust mills frequently talk about benefits of a trust, such as tax avoidance or protection of assets against long term care costs. These are both false. A living trust is a grantor trust, which means that the property within it is treated, for tax and creditor purposes, equally as if the trust were in an individual’s name.
The cost for these trusts usually exceeds $2,000, which goes to the trust mill and the attorney to whom they purportedly farm out the work of document preparation. It should be noted that these trust mills are not just companies who purport to represent seniors, but attorneys as well. Such a cost greatly exceeds that which an honest attorney will charge for basic estate planning.
The other type of scam involves the hard sale of computer products stating that individuals should handle their estate plans without a lawyer. Frankly, it is theoretically possible to use these correctly. However, estate planning comprises more than mere documents. Skilled estate planning frequently involves reallocation of assets and advice that cannot be provided by software. Of course, the sellers of these software programs won’t be there to back up your estate if there is an error in the preparation of the documents. At least their cost is nominal. One should just remember, “You get what you pay for.”
In conclusion, we should remember the story of Goldilocks and the porridge: not too hot, not too cold, just right. The same applies to wills and estate planning. You need one that is not too expensive, not too cheap, but one that is just right.
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