THE LIVING TRUST:
A GOOD IDEA GONE BAD!©
A CONSUMER PROTECTION REPORT

• April 1997–An article entitled, “O.C. Firm to Pay Fine, Quit Selling Trusts to Seniors” appeared in the popular Orange County Register. Before it was ordered to stop, a single mass-marketing firm sold approximately 25,000 inferior trusts to unsuspecting seniors!
  
  
• November 1998–From San Diego to Sacramento, seven seminars were held for attorneys on the topic, “Antidotes for Estate Planning Scams, Botched Trusts, and Other Disasters.” Unfortunately, the attendance was marginal, and the public was left off the invitation list.
  
  
• June 2001–The Huntington Beach Police hosted a consumer protection seminar which featured a detective speaking on trust mills and scams. The advertising brochure included the warning, “All estate planners are not created equal.”
  
  
• September 2001–The California lawyers’ Continuing Education of The Bar publishing firm used a mass-mailing campaign to sell their Trust Administration manual. The sales brochure contained the words, “The sheer number of trust administration cases is dwarfing probate cases. Trust administration is now the major post-death administration process for most offices rather than probate.” In plain English, large (and unexpected!) attorney bills are being paid by widows, widowers and heirs--even though trusts were purchased to avoid such bills!
  
  
• September 2001–Another mass-mailing campaign was used by the California lawyers’ Continuing Education of The Bar publishing firm. This time they recommended their Trust and Probate Litigation manual. The sales material included the sentence, “With the booming demand for trusts, litigation is becoming a potentially enormous--and lucrative--market for the estate planner.” Trust litigation is the expensive process of solving beneficiary quarrels in probate court. A family trust dispute can easily generate $100,000 or more in attorneys’ litigation fees!
  
  
• January 2002–The final pages of the 2001 Orange County Superior Court Index to Probate were printed and made available for public review in the Clerk of The Probate Court Office. Hundreds of cases are listed as “TRUST PETITIONS” under the “CASE TYPE” columns in the index. Most of these cases represent trust problems that have been submitted to probate court for solutions. In Orange County alone, from 1997 through 2014, this costly remedy has been used for thousands of trusts!

For more than 30 years, the living trust has been the subject of an extensive mass-marketing campaign. Newspapers, television, direct mail and even door-to-door flyers have spread the “good news” about buying a living trust to avoid probate court, death taxes, etc.! With such advertising, and the verbal assurance heard at seminars, Californians have enthusiastically purchased living trusts. After all, how could they go wrong?

No matter what promises you have heard or read, the truth about the living trust is not like the Hollywood ending in the Pretty Woman movie! Instead, because of botched trust documents and poor trust management, THOUSANDS OF FAMILIES have experienced costly, emotional and unexpected nightmares! Millions of dollars have been lost to unnecessary lawyer and accountant fees, probate court expenses and taxes! Even worse, bitter trust disputes are destroying family relationships in unprecedented numbers!

My name is John M. Maag, and I am “in the trenches” on a daily basis helping people, like yourself, protect their estates. Since 1981, in Huntington Beach, I have operated Estate Conservation, Inc. as an independent research and consulting firm. Mainly, I research probate court cases involving trust problems; and, as a TRUST CONSULTANT, I work with individuals and families (and their tax, legal and financial advisors) on projects involving the planning, drafting, funding and administration of their trusts. My background also includes experience as a PROFESSIONAL TRUSTEE. Neither my firm nor I have ever been the subject of a lawsuit. In 2001, I finished writing The Revealing Trust Series to expose the wide variety of problems being encountered by laymen trustees.

Most trustees are unaware of the increasing number of failed trusts. Also, they seldom comprehend that, after a death, their successor trustees will be left holding an IRREVOCABLE AND UNAMENDABLE trust document. If, for example, your trust is lacking instructions (or contains incomplete or conflicting instructions) on how to handle a particular situation, then your successor trustees can become financially liable IF they act on their own judgement. This explains why, in many cases, the only “safe harbor” for a successor trustee is a probate court “petition for instructions” (then a JUDGE will solve the problem!). It is far less expensive to correct or improve your trust while you are living! I now want to share some examples of typical trust situations with you.

Case #1
Mary was living alone in Mission Viejo when she suffered a crippling stroke which left her bedridden and speechless. Fortunately, she had designated her daughter Jill, a registered nurse, as her successor trustee. Jill and her husband decided to have Mary moved into their home instead of an institution. The arrangement was fine until Jill’s brothers were told that she was paying herself a salary from the trust for Mary’s care. The brothers then demanded that their mother be moved into a nursing home! Mary’s trust document proved to be inadequate. It did not (1) contain a statement concerning Mary’s HEALTH CARE DESIRES or (2) include instructions for compensating family members who participated in her health care. The brothers became bitter, spiteful and refused to even visit Mary as long as she lived in Jill’s home!

Case #2
Peter had been divorced for many years, but he still loved for his former spouse. However, the relationships with his three children became strained. For these reasons, and while battling cancer, he instructed his attorney to prepare a trust which would leave the bulk of his estate to his former spouse and a close friend--and only $15,000 to his children. Peter soon became another cancer statistic, and his trust quickly became another probate court case! Because of an error by the attorney, one of Peter’s sons was successful in having the trust VOIDED by a judge’s ruling! Now, Peter’s entire estate must go through probate court in Riverside County, and his children will inherit all of the property! His former spouse and close friend are both totally “out of the picture” as beneficiaries. Peter’s INTENTIONS will never be carried out!

Case #3
Hal had worked long and hard to become a successful business owner in South Orange County. At the request of his wife, he signed a family trust document. It seemed like a good idea at the time. After the death of his wife, however, he realized a shocking fact: a large part of the family business and their beach home were required (by the trust language) to be put into his wife’s IRREVOCABLE AND UNAMENDABLE SUBTRUSTS! These subtrusts restrict the trustee’s spending and many other actions. Because of his extensive financial background, Hal knew this would “throw a monkey wrench” into every future transaction with any bank or other financial institution--especially when trying to use these assets as collateral for business loans. Hal has ignored several letters from the trust attorney (who is the object of his anger), and now runs the risk of being legally REMOVED as trustee for refusing to fund his wife’s subtrusts. His adult sons can hire their own lawyer and “clear the deck” at any time! Many surviving spouses (particularly women) are angry and frustrated because of the UNEXPECTED RESTRICTIONS on family trust assets and the steady stream of legal and accountancy bills.