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Quatloos! > Investment Fraud > Financial Planning > Annuity Abuse > Living Trust Mills

Attorney General Locyer Warns Seniors about "Living Trust Mills" and Annuity Scams

(SACRAMENTO) CA Attorney General Bill Lockyer today warned California consumers to be on the lookout for "living trust mill" con artists who fraudulently sell trusts and annuities to senior citizens.

Sales agents for these scam operations often misrepresent the disadvantages of seniors' current investments and the advantages of the investments the agents are selling. They may even make seniors believe their bank accounts are less safe than the annuities or other investments they want seniors to buy. To give themselves a cloak of legitimacy, these sales agents pretend to be experts in living trusts. They often work in assisted living centers, churches and other places where seniors gather, hooking elderly victims through free seminars and other sales presentations.

"Consumers, particularly seniors and their families, should be wary," said Lockyer. "We believe there are living trust mills violating the law -- and the trust placed in them by seniors. We are determined to investigate and punish fraudulent conduct, but we also want to help seniors avoid becoming victims."

Seniors pay substantial sums of money to sales agents for living trust mills. But through fraud and deceit, the sales agents damage seniors' estate plans, and the security of their investments and life savings.

A state appellate court recently affirmed a multi-million dollar judgment the Attorney General obtained against an insurance company that conspired with a living trust mill to commit fraud in selling trusts and annuities to seniors.

In their solicitations, sales agents often pose as expert financial or estate planners. They pass themselves off as a "trust advisor", "senior estate planner", or "paralegal", and schedule an initial appointment with seniors in their homes. Under the guise of helping set up or update a living trust, the sales agents find out about seniors' financial assets and investments.

Usually, the sales agents then schedule a second visit to deliver a completed trust and have documents signed and notarized, and title of assets transferred to the trust. Typically, the agents go over the assets to be placed in the trust. They use that review of seniors' investments to scare them into believing their investments are unsafe, and that by "moving" their money, they can earn higher interest with no risk. The agents may have seniors sign documents that transfer the senior's CD, mutual fund accounts, or other investments to an annuity, or a so-called "promissory note" or other investment.

Planning an estate and choosing investments involve important legal, financial and personal decisions. If estate planning documents are not properly prepared or executed they can be invalid and cause lasting damage.

Following are additional tips to help consumers avoid becoming victims of living trust mills and their scams:

  • Living trust mills' sales agents are not attorneys and are not experts in estate planning.

  • Documents in the trust packages may not comply with California law.

  • Sales agents may not follow procedures set by law for executing or witnessing wills and other documents. These violations may make the documents subject to challenge.

  • Watch out for companies that sell trusts and also try to sell annuities or other investments.

  • Sales agents may fail to disclose possible adverse tax consequences or early withdrawal penalties that may be incurred when transferring stocks, bonds, certificates of deposit or other investments to annuities.

  • An annuity is not 100% safe, and only a portion is guaranteed by the state. Insurance companies can and do fail, and their assets may not be enough to pay the full value of their customers' investments.

  • So-called "promissory notes" are not insured by the FDIC or any other government agency and may be very risky. They may not be registered as securities with the state.

An attorney qualified in estate planning can help consumers decide if they need a living trust or other estate planning documents, or help them review an existing trust or will. To obtain a list of attorneys who are certified as estate planning specialists, and to receive other written information about estate planning and how to select an attorney, call the State Bar of California's toll-free number for seniors at 1-888-460-7364. Before consumers buy an annuity or any other investment, they should review it with people they know and trust, such as their financial or tax advisor, their attorney and trusted family members.

Consumers who feel they have been victimized by a living trust mill, or annuity or promissory-note fraud, should report it to their local district attorney and the California Department of Insurance. Consumer complaints also may be filed online at the Attorney General/s Website at

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Other investment vehicles, such as IRAs and employer-sponsored 401(k) plans, also may provide you with tax-deferred growth and other tax advantages. For most investors, it will be advantageous to make the maximum allowable contributions to IRAs and 401(k) plans before investing in a variable annuity.

In addition, if you are investing in a variable annuity through a tax-advantaged retirement plan (such as a 401(k) plan or IRA), you will get no additional tax advantage from the variable annuity. Under these circumstances, consider buying a variable annuity only if it makes sense because of the annuity's other features, such as lifetime income payments and death benefit protection. The tax rules that apply to variable annuities can be complicated – before investing, you may want to consult a tax adviser about the tax consequences to you of investing in a variable annuity.

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