Our firm recently posted information about establishing a living trust. As with most things, there are right and wrong ways to do it.
One of the “wrong” ways is the subject of a warning by Minnesota’s Attorney General. Her office’s website contains information about avoiding “trust mills” and why they can be dangerous.
Unlike the individual approach of a professional attorney, trust mills generally market a “one-size-fits-all” approach. In most cases, the ultimate goal is not to provide you with an effective living trust that does what you want it to do for you, but to have you “fund” the trust (put assets in it) with annuities and other insurance products that they expect to sell you and make commissions on. The trust is sold as sort of a “loss leader” to get you hooked into the program that will eventually include the insurance products.
While such annuities and insurance products are not necessarily bad things in and of themselves, when used in a way that does not make the best use of the trust either legally or financially, they can actually even be harmful in your overall estate plan.
First, these are called “trust mills” because the documents are generally NOT prepared by one attorney working specifically on your estate plan. They are generally churned out en masse, even by non-attorneys in word processing centers. Again, the idea is to get the document produced and signed as soon as possible so the insurance products can be purchased to fund the trust.
Second, for some people, a living trust is not the best option for their estate plan. But since the ultimate goal of the trust mill representative is to sell you something to go into the trust, they lose money if they can’t first convince you that the trust is the best option for you.
Third, in some situations, having assets in a living trust may count against you if you require financial assistance for long-term medical care or nursing home costs. Those assets are taken into account in your total financial picture because you have access to them in a living trust.
True, everyone should have an estate plan, so what seems like an “easy” opportunity to get one may be tempting. But what seems easy now may have negative consequences in the future. Don’t risk your future, or that of your family, without sound legal advice.