Touting living trusts as the cure-all for probate court
some attorneys aren't telling the whole truth about the limits of
this estate planning mechanism.
Though the Federal Trade Commission in April put a stop to
representations Ada-based Pre-Paid Legal Services made about living
trusts, some contend the distortion continues for Oklahoma lawyers
who try to lure clients with false promises.
"We have concerns about ads that living trusts are a panacea for
all estate planning problems -- they're not," says attorney Fred
Doak, the 1997 chair of the Oklahoma Bar Association's Estate
Planning, Probate and Trust Law Section.
The lawsuit against Pre-Paid last spring highlights a problem some
attorneys and advocates for the elderly perceive as being bald-
misrepresentations regarding the advantages of living trusts.
The FTC charged that Pre-Paid and Dallas-based Administrative
Company made false statements about the benefits and appropriateness
of the more than 3,000 living trusts sold to elderly consumers in 43
Specifically, the federal agency argued sales literature that
stated, "You could save thousands of hard earned dollars" and other
representations failed to inform consumers that probate actions
still occur despite the existence of a trust and that trusts are
contestable on grounds similar to will contests.
Living trusts, also called inter vivos trusts or revocable trusts,
are an estate planning tool in which individuals place lifetime
assets and, by transferring ownership of the assets to the name of
the trust, remove the assets from the estate thereby avoiding
In a consent agreement, Pre-Paid refunded consumers more than
$300,000 without admitting liability. The multi-level marketing
company, with total revenues of $60 million in 1996, has since
marketing living trusts and now provides them as part of its legal
services package only if clients request them.
"We washed our hands of them from a marketing standpoint," says
Pre-Paid's Chief Financial Officer Randy Harp.
The FTC's Director of Consumer Protection called Pre-Paid's
practices "particularly contemptible because they were designed to
prey on the financial fears of the elderly by exploiting a general
perception that probate is an expensive and drawn-out process."
The FTC also took issue with Pre-Paid's assertions that living
trusts were appropriate planning mechanisms for everyone.
But Larry Parman, who routinely gives estate planning seminars and
advertises for those programs in local newspapers, says living
are a good move for virtually everyone, though he usually recommends
them to people with assets of more than $100,000.
"With less than $100,000 to $150,000 it's a close balancing act,"
Doak says one of his greatest qualms about living trusts is an
exaggeration of the tax benefits. …