Beware of Trust Mills
High Volume “Estate Planning” May Be Elder Financial Abuse
With the recent rise of health concerns, many people young and old rushed to implement an estate plan to protect themselves and their loved ones. Unfortunately, some less scrupulous individuals used the fear as an opportunity to prey on portions of our elderly community, targeting them with advertisements and solicitations for low cost estate plans. While some of these individuals provide estate planning that genuinely assists their clients, others leverage fear and panic to provide ineffective or incompetent documents that could cost clients and their family more down the line, or foist unnecessary and expensive financial products on the elderly. Their work is little more than a scam. These “trust mills” became such a problem in California that the attorney general set up an information page to protect Californians from falling for the scam. https://oag.ca.gov/consumers/general/living_trust_mills. As explained by the attorney general:
Unfortunately, there are unscrupulous actors working for “living trust mills” who will sell you an unnecessary living trust or use your financial information to sell you products that are less secure than your current investments. This type of scam often targets seniors lured by “free” seminars on living trusts or other estate planning presentations. These scam artists often work in assisted living centers, churches and other places where seniors gather. Occasionally, sales agents will pose as estate planners or financial experts to gain the trust of the senior in these “free” seminars and later schedule a visit in the senior’s home to gather information they can use to steal your identity or sell you financial products you don’t need.
Fortunately, the California Legislature recognized the need to protect the elderly. The Elder and Dependent Adult Civil Protection Act provides an avenue of relief for elders or other dependent adults targeted by scam artists operating trust mills and affords aggressive remedies for elders or those acting on their behalf.
Unscrupulous Trust Mills Can Result in Claims for Financial Elder Abuse
Financial abuse of an elder occurs when a person or entity “[t]akes, secretes, appropriates, obtains, or retains real or personal property of an elder . . . for a wrongful use or with intent to defraud.” Welf. & Inst. Code § 15610.30. In order to allege a cause of action for financial elder abuse, the plaintiff must allege the following:
- The plaintiff is an elder (i.e., the plaintiff is over the age of 65).
- The defendant took, secreted, appropriated, obtained, or retained personal property.
- The personal property belonged to the elder.
- The personal property was taken for a wrongful purpose, through undue influence, or with intent to defraud. Welf. & Inst. Code §§ 15610.27, 15610.30.
In a financial transaction with an elder, the first three prongs of a claim for financial elder abuse nearly always exist: the victim is an elder, the defendant obtained money from the elder, and the money belonged to the elder. The question to examine is whether the property was taken for a wrongful purpose, through undue influence, or with intent to defraud. An examination of some common features of trust mills shows how these elements may exist.
Unauthorized Practice of Law
As the attorney general warns, one characteristic of trust mills is employment of non-attorneys to draft and advise regarding estate planning. Legal document assistants may not draft estate planning documents or give legal advice, and paralegals must work under the direction of an attorney. These requirements are set forth in both Rule of Professional Conduct 5.5 and Business and Professions Code section 6125. Under the Business and Professions Code, it is a misdemeanor to hold yourself out to practice law if not licensed, and myriad relief is available to the victim of such services. Bus. & Prof. Code §§ 6126(a), 6126.5.
An elderly victim of a trust mill could claim that the trust mill obtained funds from the elder through deceptively marketing itself as providing legal services when, in reality, a legal document assistant or unsupervised paraprofessional provided the advice and documents. This practice is not only illegal, but could constitute fraudulent misrepresentation, satisfying the fourth prong of the elder abuse statute.
Improper or Expensive Financial Products
The foisting of inappropriate or overpriced financial products on an elder could satisfy the fraud, undue influence, or wrongful purpose prong depending on the tactics and representations used by the trust mill. Among other things, misrepresentation of the security of an investment can satisfy the fraud prong of the statute. See, e.g., Negrete v. Fidelity and Guar. Life Ins. Co., 444 F. Supp. 2d 998, 1001-03 (2006); see also Makaeff v. Trump University, LLC, 145 F. Supp. 3d 962, 980-81 (C.D. Cal. 2015).
Similarly, an elder could claim that the trust mill exercised undue influence. The Act sets forth a number of factors a court must consider in determining whether undue influence occurred. Among them are (1) vulnerability of the victim, (2) the influencer’s authority, including status as a fiduciary, legal professional, or expert, and (3) the tactics used, including use of pressure and changes in property rights. Welf. & Inst. Code § 15610.70.
Finally, the mere knowledge that the financial product is inappropriate for the elder likely satisfies the wrongful use prong: “A person shall be deemed to have taken . . . property for a wrongful use if . . . the person . . . knew or should have known that this conduct is likely to be harmful to the elder . . ..” Welf. & Inst. Code § 15610.30(b).
Depending on the circumstances, remedies for financial elder abuse may include actual damages, punitive damages, double damages pursuant to Probate Code section 859, treble damages under Civil Code section 3345, attorney’s fees and costs, and additional prejudgment relief, such as restraining orders, right to attach orders, and temporary protective orders. For a further discussion of the available remedies, you may read:
Financial Elder and Dependent Adult Abuse – A Primer for Litigators (http://cclawyer.cccba.org/2013/02/financial-elder-and-dependent-adult-abuse-a-primer-for-litigators/)
How To: Writs of Attachment in Financial Elder Abuse Litigation (http://cclawyer.cccba.org/2014/04/how-to-writs-of-attachment-in-financial-elder-abuse-litigation/)
Attorneys who represent elders who may be the victims of trust mills should consider potential elder abuse claims against those individuals or entities who provided the legal services. Elders should be careful to scrutinize low cost estate planning options to be sure they do not fall victim to a trust mill or become the victim of the unauthorized practice of law.