What Seniors Should Know About Trust Mill Scams

Beware of offers for free seminars that claim you can protect your money with a living trust or other estate planning strategy. These seminars might actually be a ploy by unscrupulous sales people to get you to buy expensive financial products you don’t need.

Trusts can be effective estate planning tools for some people. However, individuals and companies are operating what are known as trust mills—schemes that prey on older adults and scare them into believing they will lose their money unless they protect their assets with a trust.

Some states have been cracking down on companies operating trust mills. However, financial predators continue to use this tactic to take advantage of older adults, says Neil Granger, an elder financial abuse consultant and expert on trust mills scams who has helped draft legislation to protect seniors in California.

To protect yourself and your money, you need to be aware of how trust mills work, the warning signs of these scams and what to do to avoid them.

What is a trust?

A trust is an estate planning tool. It allows you to specify how you want your assets distributed when you die. Assets transferred to the trust while you’re living avoid the probate process when you die and pass directly to your beneficiaries. That can save your heirs time and money. It also can protect privacy because a living trust isn’t made public. A will, on the other hand, is made public during the probate process.

Another benefit of a trust is that it can be used for long-term care planning. You can name a trustee to manage your finances for you if an injury, illness or dementia leaves you unable to make financial decisions on your own. And because your assets have been shifted from your name to the trust, you might meet income and asset requirements to qualify for Medicaid, which can cover the cost of long-term care. However, it’s important to work with an elder law attorney who specializes in Medicaid planning to properly structure a living trust for long-term care needs. 

[ See: Why You Need a Will or Trust ]‍

What is a trust mill scam?

 A trust mill is a scheme where financial predators use a trust as a pretext for selling high-commission insurance products, such as annuities. 

In the past, these scams often began with an invitation to a free “senior seminar” at a restaurant, Granger says. Now, trust mill scammers tend to lead presentations at churches, retirement communities, assisted living facilities and other places where older adults are likely to be. Their tactics, however, are still the same. 

The premise of the presentation is to scare attendees into believing that their assets are at risk. “The idea is to say, ‘You’re going to lose all your money unless you do something. The way you can protect your money is to put it into a trust,’” Granger says. 

The claim is that creating a trust and transferring assets into that trust can shield your money if, say, someone were to sue you or you needed to appear to have limited assets to qualify for Medicaid to pay for long-term care.  Although a trust can serve this purpose, the goal of trust mill scammers is to schedule a visit at your home to gather details about your assets and sell you a product such as an annuity that will earn them a large commission but could be financially risky for you, Granger says.

Signs of a trust mill scam

The people running trust mills might appear to be trustworthy. Often, they are insurance agents. Or they might claim to be a certified senior advisor, a trust advisor or senior estate planner. However, it’s important to look past their titles for these red flags that they want to take advantage of you.

• They are promoting a one-size-fits-all approach. Not everyone needs a trust or an annuity.
• They are trying to scare you into believing that your money isn’t safe and that it will be safer in an annuity. Annuities are insurance products that can make sense in certain situations. However, they can be complex and can come with steep surrender fees if you try to withdraw your money before a certain time period—leaving you unable to easily access your money. 
• They are cross-selling products. If someone is trying to get you to take out a reverse mortgage on your home to buy an annuity, this practice is considered predatory. Federal law prohibits lenders from requiring borrowers to purchase an annuity as a condition of receiving a Home Equity Conversion Mortgage.
• They are asking to meet alone with you in your home. “Any time you’re being encouraged to meet with somebody without any of your trusted people around is a red flag,” Granger says.
• They are pressuring you to make a decision without consulting with any other financial or legal professionals, your bank or credit union representatives or family members.

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How to avoid trust mills

Take these steps to avoid becoming a victim of a trust mill scam.

Ignore offers for free seminars on estate or financial planning. If you need help safeguarding your money in retirement, look for a fee-only (not commission-based) fiduciary who is required to work in your best interest, such as a CFP® professional, by using a free service such as Wealthramp, the Garrett Planning Network or the National Association of Personal Financial Advisors. Work with an estate planning or elder law attorney if you want to create a trust.

Check the credentials of sales agents or advisors. If someone is trying to sell you an insurance product such as an annuity, they must have a state insurance license and must be a registered financial professional—which you can check at FINRA’s BrokerCheck— to sell variable annuities. “If they don’t have licensing information on their materials or card, don’t talk to them,” Granger says.

Don’t make decisions alone. “If you’re thinking of doing anything, get trusted family members involved,” Granger says. Or reach out to another financial or legal professional before signing any contracts. 

[ Keep Reading: How to Protect Your Finances as You Age ]

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