Living trust sales are a type of consumer fraud in which con-artists make millions of dollars selling unnecessary trusts. Each year, thousands of consumers lose anywhere from $500 to $5,000 from these schemes. On some occasions, families end up facing potentially greater costs after the senior’s death due to problems associated with the use of a poorly-executed living trust.

A living trust is a legal arrangement where a person, called the "grantor” or “settlor," places his or her assets into a trust during his lifetime. The trust is administered by a "trustee" for the benefit of the trust's beneficiaries. Living trusts are a widely recognized and a legitimate estate planning device. 

Because assets transferred to the trust are no longer owned by the grantor, at the grantor's death, the assets are not part of the grantor's estate and do not have to be probated. Accordingly, a living trust can avoid what can be a costly, lengthy, public probate process. Whether a living trust is an appropriate estate planning tool depends upon an individual's circumstances and goals.

Confusion about probate and estate taxes provide a ripe environment for scam artists to prey on older consumers' fears that their estates will be eaten up by costs.  The con-artist generally sponsors seminars on living trusts or send postcards to consumers inviting them to call for an in-home appointment, ostensibly to learn whether a living trust is right for them. A customary practice, once the consumer is in the door, is to greatly exaggerate the benefits of a trust.

In some instance, the offer of estate planning services is merely a ruse to gain access to consumers' financial information and to sell them other financial products, such as insurance. Con artists may followup on the initial meeting by visiting the senior citizen in her own home through offers of a free living will, a free power of attorney, or a free "estate analysis."  A home visit gives the salesman a better feel for the wealth of the senior citizen and allows him to gauge the type of financial products to push.  

Con artists promote their business by making false or incomplete statements about the probate process, guardianship, and the taxation of estates.

First, they may scare the senior citizen by stating that unless the assets are in a trust, the estate will be subject to a costly estate tax.  In fact, most estates face no death taxation at all. Indeed, a transfer at death to a spouse is exempt from estate taxes. A transfer at death to others, such as the children, is rarely taxed.  As a result of the 2017 tax bill, the “death tax” exemption went up to $11 million. This means that less than ½ of 1% of the population must pay a federal estate tax.

Second, they may claim that a living trust can help avoid a contested will.  In fact, trusts are subject to attack on same grounds that are used to contest a transfer by will.

Third, the salesman may claim that a living Trust helps the estate to avoid creditors such as catastrophic medical claims.In fact,assets placed into a living trust are subject to the claim of creditors, including medical claims. 

Fourth, the salesman may claim that a living trust avoids a spouse's claims to a share of the estate.  In fact, Minnesota law provides that a surviving spouse may claim a share of revocable trust assets, including a living trusts.

Finally, the salesman may claim that living trusts avoid the expense of guardianship. This is true as it relates to financial guardianship.  It has no bearing if the issue is keeping track of expenditures.  A durable power of attorney is much simpler and is a less costly alternative to achieve the same goal.


American Family Prepaid Legal Plan (“AFLP”) was owned by Stanley Norman and Jeffrey Norman.  The Normans also owned Heritage Marketing and Insurance Services, Inc. They marketed living trusts, and insurance annuities, by direct mail.  The marketing piece represented that estate taxes were prohibitively expensive and that the probate process is fraught with uncertainty. When a senior responded to the direct mail piece, a sales agent would set up in at-home meeting to make the presentation.

The sales agents had little expertise in estate planning, but they knew how to sell. The goal was to they leave a home without a check in hand from the senior citizen.  The senior citizen would generally be charged around $2,000 to set up a living trust. 

In turn, AFLP would pay a law firm a small amount of money to complete a living trust template with the name of the trustees and beneficiaries.  

If the sales agent was a licensed insurance agent, he or she then brought the living trust to the senior citizen’s home and secured the senior citizen’s signature.  If the sales agent was not a licensed insurance agent, then the living trust was turned over to an insurance agent for delivery and execution.  

The insurance agent then reviewed the information secured by the sales agent about the financial status of the senior citizen.  With this information in hand, the agent would then bring the senior citizen the unsigned documents, supposedly to secure the signatures and complete the execution of the living trust. During this meeting, the agent would segue the conversation into the need for the senior citizen to protect the income-earning assets of the estate and advise them of the need for an annuity.  People were not told in advance that the purpose of the meeting was to sell insurance.  The agent then often misrepresented the terms of the annuity, particularly as to high surrender charges and the restrictions on the ability of the senior citizen to get access to the principal in the annuity. The court noted that on many occasions the annuity would tie up as much as 89% of the senior citizen’s assets for as long as 14 years, and that the average age of the senior was 75.  

Lori Swanson filed suit against the AFLP, Heritage and the Norman in March of 2007, two months after being sworn in as Attorney General.  The matter went to trial in the fall of 2009.  In April of 2009, the court issued a 55-page order, determining that the defendants sold 1,277 legal plans in Minnesota, that the average age of the purchaser was 75 years, and that 328 of the seniors purchased an annuity. In September of 2010, the court ordered total judgment of $7,000,000.00 against the defendants. 

The defendants appealed, and in July of 2012 the Court of Appeals affirmed the following determination by the trial judge that:

1.  The defendants engaged in a pattern and practice of fraudulent behavior.

2.  The defendant violated a fiduciary relationship in making the sales.

3.  The defendants violated the personal-solicitation-of-insurance statute regarding disclosure of the insurance agent’s intentions when entering the home. 

Amended Complaint:  Attached

State’s Memorandum in Support of Civil Penalties

Court of Appeals opinion: See Attached