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Randall D. Armour: Beware of trust mills when planning your estate

It’s Your Money

Posted: October 21, 2009 7:27 p.m.
Updated: October 22, 2009 4:55 a.m.
 
Proper planning of your estate requires consideration of your specific needs and family goals as well as extensive knowledge of current laws. Many improperly prepared estate plans have led to disastrous results that could have easily been avoided if the plan had been prepared by a qualified professional.

Many companies market generic one-size-fits-all trust packages they claim will avoid probate and/or save estate taxes. These companies are referred to by the legal profession as trust mills.

Generally, the client is told the documents are created, reviewed or approved by an attorney, although the attorney never actually meets with the client.

How do you spot a trust mill? There are many differences in the process of preparing a properly drafted estate plan and a plan created by a trust mill. Here are some of those differences:

n Trust mills often prepare documents after the client has filled out a simple check-the-box type questionnaire. Little or no counseling is given to the client and the client may meet with a paralegal, CPA or financial advisor, but not with an attorney. One reason for the lack of advice is many estate planning issues involve legal matters and any advice on these matters would constitute the practice of law without a license. A face-to-face meeting with a qualified estate planning attorney is essential in determining your specific needs, which will depend on a number of factors. For example, trust mills rarely consider retirement fund and insurance policy planning which could lead to increased taxes and distributions which are inconsistent with the intended overall plan.

n The cost of the documents is a good indicator of whether or not you are dealing with a trust mill. Trust mills usually charge  from $300 to $700 for their documents. Just remember, you get what you pay for. In this case, not very much.

n Trust mills often provide documents for limited purposes, such as avoiding probate or estate taxes. A properly drafted estate plan will also address issues such as incompetency, children from prior marriages and tailoring management and distribution of assets for beneficiaries who may be unable to properly manage their inheritance.

n A major problem with trust mills is the lack of proper assistance in funding (transferring assets into) the trust. I have found that most of the mill trusts that I have reviewed are not properly funded and the documents do not provide a way of funding the trust after death without probate.

A trust must be properly funded to work. A qualified estate planning attorney will generally draft deeds and other documents necessary to transfer certain assets to the trust and will assist the client in transferring other assets.

Improper estate planning can lead to increased taxes and distributions inconsistent with your goals. If you are considering setting up an estate plan, contact a qualified attorney in your area.

This article is designed to be of general interest and is not to be construed as legal advice. Before acting on any matter contained referred to in this article, please consult with your personal legal adviser.

Randall D. Armour is an attorney and licensed real estate broker. His Web site can be visited at www.ArmourLaw.com. “It’s Your Money” appears Thursdays and rotates between a handful of the valley’s financial professionals.  His column represents his own views and not necessarily those of The Signal.

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