Avoid Ill-Fitting or Scam Living Trusts

 In Trusts

Living trusts are some of the most valuable tools for estate and wealth planning, but some unscrupulous individuals and companies can seriously harm your family’s financial and legal situation, by offering one-sized fits all scam trust plans or by proposing something that promises the moon, most typically either 100% avoidance of federal income taxes or 100% bulletproof asset protection with just a few signatures, especially if it claims it can protect your assets from a lawsuit already going on against you.

The former kind, which are typically produced for a low cost by a living trust company (a so-called “Trust Mill”) tries to squeeze countless different family and financial scenarios into one specific plan that has a lot of scattershot provisions, whether they are helpful, benign, or harmful to your situation. Sometimes, these can get particularly troublesome if planning for a married couple and the first spouse has died. Trust law provides some tools to fix some problems with these sorts of trusts, but they can be very expensive to fix. In addition, such trusts assume that every family needs a living trust, which is often accurate in other states, but is often not necessary in Texas due to our probate procedures.

The latter kind, sometimes known as “pure trusts” or “constitutional trusts” or similar names claim that they somehow exempt whatever is put into them from federal income tax because their design predates the constitution or a similar tale. That is a great way to pay a lot of very high tax penalties and perhaps even go to jail for tax fraud.

As far as asset protection goes from scam trusts, there is no way to build something that is absolutely, 100% bulletproof protected from creditors from the moment you sign it, but what you can do is to make a legitimate series of hoops that are so expensive to jump through that it’s not worth it for anyone to try. Importantly, as with anything in life, and unlike the claims of fraudulent trusts, these tools take ongoing work to maintain, including separate accounts, managing them correctly according to their trust documents, and the like. Some of them also require you to lose control over the assets, either partially or completely. Any significant planning you undertake has to be done BEFORE a creditor or lawsuit shows up or would be likely to happen, otherwise even the most sophisticated structure will go “poof” and disappear across the country. Even worse, courts will often take an even nastier view of the original situation once they find out assets are being hidden.

Let our estate planning attorneys in Allen set up a living trust for you

The estate planning attorneys at Weeks Law Firm, PLLC, offer your family legitimate tools to protect your assets and plan for your spouse and children’s future.  Depending on your situation, we may be able to reduce or eliminate estate taxes, limit income taxes, and protect you and your family’s assets, but the tools to accomplish these goals require careful planning, ongoing and proactive maintenance, and periodic review for them to function correctly with a changing legal landscape.

If you need a  living trust set up, our attorneys in Allen can help you. Contact us for more information today.

Recommended Posts