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Seniors file class action against sellers of living
trusts
Thursday, January 10, 2008
By Michelle Massey, Texarkana Bureau
TEXARKANA - A number of Texarkana residents have filed
suit against sellers of living trust documents in a class
action accusing the salesmen of exploiting senior citizens.
Class
representatives James P. Birts, Nate S. Orben and Darlene
M. Orben filed suit Dec. 19, 2007, in the Circuit Court
of Miller County, Ark. Defendants named are John R. Vermillion,
John Vermillion and Associates L.L.C., CLA USA Inc.,
CLA USA Insurance Services, CLA Marketing, CLA Estate
Services, CLA Insurance Services, Charles Loper Jr.,
Charles Loper III., Steven Morgan, Robert Reese and The
Estate Plan Inc.
Plaintiff James Birts of Texarkana, Texas,
says he purchased a living trust after attending a lunch
presentation at Cattleman's Steakhouse Restaurant. However,
Birts states the document was misrepresented and that
if he dies with only these estate-planning documents,
his estate will still need to be probated because the
living trust failed to factor in his real property in
Arkansas.
The living trust sellers are facing allegations
of "masquerading as qualified financial advisers,
estate planners, lawyers, and paralegals" to "exploit
and prey" upon senior citizens with the creation
and selling of "unnecessary and often useless" living
trusts.
According to the legal dictionary on Law.com,
a living trustis created by a declaration of trust executed
by the trustor during his/her lifetime, as distinguished
from a "testamentary trust," which is created
by a will and only comes into force upon the death of
the person who wrote the will.
Most commonly it is a
trust in which the trustor receives benefits from the
profits of the trust during their lifetimes, followed
by a distribution upon the death of the trustor, or the
trust continues on for the benefit of others (such as
the next generation) with profits distributed to them.
Defendants are accused of fraud, unauthorized practice
of law, negligence, breach of fiduciary duty and conspiracy.
The suit alleges that the defendants created and sold
the living trusts as part of a scheme to gain access
to senior citizens' financial information in order to
sell annuities and other financial products.
According
to the original complaint, the scheme begins with advertisements
that persuade senior citizens to attend a free lunch
or dinner. At these meetings, the "unlicensed" living
trust defendants conduct presentations and distribute
materials that misrepresent the impact of probate fees
and estate taxes in order to create fear that the senior
citizens need to buy a trust to prevent heirs from losing
their estate.
These presentations include references to
celebrities such as Elvis and describe the large amounts
these celebrities have paid in estate taxes. The plaintiffs
state these presentations do not include information
about the federal estate tax exemption, the sliding scale
of the exemption amount, or the possibility of the elimination
of future estate taxes. Further, the presentation does
not tell senior citizens with estates larger than the
exemption amount that the purchase of these living trusts
will not automatically eliminate all estate taxes. The
forms and decisions made by the defendants fail to take
into account the entire senior's assets and ultimately
and fail to serve the legal purpose as presented, argue
the plaintiffs.
In addition, the complaint contends that
the defendants convince the seniors to execute a "pour-over
will" at the time the living trust and the other
documents are executed. "Senior consumers are unaware
and are never told verbally that any property not disposed
of in the trust will be disposed of according to the
pour-over will, which will need to be probated," the
complaint states.
The plaintiffs claims the presentations
convince the senior citizens to use their IRA accounts
or other tax-exempt growth products to purchase variable
annuities. However, according to the plaintiffs' accusations,
the presentations and documents do not demonstrate the
redundancy with regard to a variable annuity's tax deferral
benefit when purchased in a qualified plan and also do
not inform the consumer of the associated fees, surrender
charges and commissions associated with these variable
annuity products.
After an initial down payment on these
products, defendants' representatives conduct a follow-up
meeting with the seniors and will often execute the living
trust documents among other legal documents. The second
payment is collected after the documents are executed.
The complaint emphasizes that up until this point, the
defendants involved in the estate planning, drafting,
and execution of legal documents are not licensed to
practice law. However, in a "feeble attempt to escape
liability for the unauthorized practice of law," the
defendants use attorney John R. Vermillion to rubber
stamp his name as approval, the complaint states. Although
the attorney receives a check directly from the seniors,
the plaintiffs state the attorney does not advise or
draft any of the legal documents involved.
The plaintiffs
accuse Vermillion of violating rules of professional
conduct, failing to advise clients, engaging in unsolicited
contact with clients and practicing law in Arkansas while
unlicensed. Defendant and attorney John R. Vermilion
is licensed to practice law in Texas, Louisiana, Oklahoma
and Tennessee. According to his law firm's Web site,
he is a member of the American Academy of Estate Planning
Attorneys and the National Academy of Elder Law Attorneys.
He is affiliated with Hyatt Legal Services and serves
as a referral attorney for defendant The Estate Plan.Defendant
The Estate Plan states that its licensed attorney network
allows an estate planner to refer potential clients who
have completed a comprehensive workbook and signed a
purchase or retainer agreement for attorney services.
The Web site states this arrangement allows an attorney
to avoid the time and costs associated with marketing
and advertising. The estate planner receives a consultation
fee for consulting with the clients about general information
about estate and financial planning concepts.
Self described,
CLA USA "coordinates: non-legal services, legal
services provided by your attorney, tax services provided
by your accountant, stock broker, and insurance services." Defendant
CLA USA maintains that it is in the "business of
preserving people's assets" and its insurance representatives
are internally certified and have specialized knowledge
with elderly and retired clients' issues. The potential
class members include those seniors who purchased living
trusts from the defendants from Jan. 1, 1998, until the
date of class certification.
Common questions of law
and fact among the potential class include: Whether defendants
made misrepresentations to entice potential class members
to purchase living trusts and other products; Whether
defendants fraudulently concealed material omissions;Whether
defendants engaged in unauthorized practice of law; Whether
there was conspiracy among the defendants to commit fraud;Whether
defendants breached fiduciary duties; Whether defendants'
conduct was intentional; Whether plaintiffs are entitled
to rescission, refund, or restitutionary damages and;
Whether plaintiffs are entitled to injunctive relief.
In addition to the disgorgement of defendants' gains
and restitution, the plaintiffs are seeking temporary
and permanent injunction against the defendants to cease
and desist the sales of living trusts while telling the
consumers they will avoid estate taxes, for the defendants
to explain in every meeting that the living trusts is
unnecessary to avoid estate taxes because of federal
estate tax exemptions, for the defendants to notify members
of the proposed class with regard to the potential restitutionary
relief and any other activities to prevent future fraud.
Texarkana attorneys Richard Adams, Shivali Sharma, Leisa
Pearlman and Corey McGaha of the law firm Patton, Roberts,
McWilliams and Capshaw L.L.P., are representing the plaintiffs.
Other class counsel includes Texarkana attorneys Marshall
Wood and Cyndia Hammond of the law firm Norton and Wood
and attorney Ronald S. Burnett.
Currently, the defendants
have not responded to the plaintiffs' allegations.
Miller
County Circuit Judge Jim Hudson is assigned to the litigation.Case
No.: Cv-2007-474-2
Legal Disclaimer. This information has been provided for informational purposes only. It does not constitute legal advice. The receipt of this information does not establish an attorney client privilege. Proper legal advice can only be given upon consideration of all the relevant facts and the law. Therefore, you should not act upon any information contained herein without seeking appropriate legal counsel.
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