North Carolina Department of Justice
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Cooper takes aim at living trust scheme that targets seniors

Release date: 5/22/2006

For immediate release Contact: Noelle Talley

ate: May 22, 2006 Phone: 919/716-6413


Cooper takes aim at living trust scheme that targets seniors

American Family Prepaid Legal, Heritage Marketing accused of taking hundreds of thousands of dollars from seniors for unfair trusts and annuities

RALEIGH: Attorney General Roy Cooper today filed suit against a scheme that deceived dozens of North Carolina seniors out of thousands of dollars of their life savings.

As alleged in Cooper’s complaint filed today in Wake County Superior Court, American Family Prepaid Legal Corporation and Heritage Marketing and Insurance Services agents use aggressive, unfair and deceptive sales tactics to pressure elderly consumers, many with limited financial resources, to purchase living trusts and annuities that are often unsuitable to the consumers’ age and circumstances.

“These companies are preying on seniors, bullying them into spending thousands of dollars on trusts they don’t need and investments that don’t help them,” said Cooper. “We must put a stop to this scheme now, before any more of our seniors get hurt.”

Cooper is asking the court to stop AFLP and Heritage from using illegal deceptive practices and engaging in the unauthorized practice of law. He is also seeking cancellation of the companies’ contracts, refunds for North Carolina consumers and civil penalties. AFLP and Heritage are affiliated companies from Irvine, California that share an office in Greensboro. The suit also names Stanley Norman and Jeffrey Norman, both of California, who serve as officers and directors of the companies.

The North Carolina State Bar joined Cooper in bringing the suit against AFLP and Heritage.

According to information gathered by Cooper’s investigators, Heritage sold two annuities to an 84-year-old man for $547,000, nearly his entire nest egg. To purchase the annuities, a Heritage agent convinced the consumer to cash in other investments, which cost him nearly $175,000 in capital gains taxes plus fees on an annuity he already owned which was just twelve days from maturing. In another instance, Heritage sold an annuity to a 70-year-old woman who was suffering from several health problems requiring her to take 15 different medications. A Heritage agent took the woman, who was recovering from surgery, to the bank so that she could withdraw her entire life savings—money she needed to pay for medical care—to purchase an annuity for $29,000.

According to the complaint, the scheme started with a mailing from AFLP. AFLP has pitched living trusts in North Carolina since 2002 to consumers aged 65 or older using mailings that state, “PROBATE COSTS AND ESTATE TAXES can be an unnecessary HEAVY BURDEN on your heirs and loves ones…PROTECT YOUR SAVINGS!” Consumers who respond to the mailing thinking that they are going to receive written materials on the probate process instead get a call from an AFLP agent to schedule an in-home appointment. Some consumers who don’t respond still get the calls.

Cooper contends that AFLP sales agents use aggressive tactics during their in-home sales pitches to bully seniors into buying a living trust for $1,995. The agents misrepresent facts about the probate process and use emotional language to frighten seniors into purchasing living trusts. They also discourage them from consulting with an attorney or their children about the purchase. None of AFLP’s agents are licensed attorneys, although their sales presentations include legal advice.

At the time that many of these sales took place, North Carolina law limited probate costs to $3,000. A probated estate would have to be worth $500,000 or more before probate fees would exceed or equal the cost of AFLP’s living trust plan. Few seniors who purchased trusts from AFLP have assets of $500,000 or more. In at least one instance, AFLP sold a living trust to a consumer who could barely pay the $1,995 fee.

After AFLP completes the paperwork for a living trust, a Heritage sales agent delivers it to the consumer to be signed and notarized. Cooper alleges that the main purpose of the visit is to convince the senior to purchase insurance products such as equity-index, deferred annuities. The annuities pitched by Heritage typically have a term of up to 20 years and include stiff financial penalties if consumers withdraw the principal within 15 years. The long surrender period and the high surrender fees mean that many of these consumers will be unable to access their money if needed for medical emergencies or long-term health care without paying a large penalty.

Cooper’s office has received a total of 23 written complaints about AFLP and Heritage from seniors and their family members from across North Carolina. Consumers who believe they or a loved one may have been a victim of this or a similar scheme are encouraged to call the Attorney General’s Consumer Protection Division at 1-877-5-NO-SCAM.

“Scam artists and other dishonest businesses try to take advantage of consumers of all ages, but we know that seniors can be special targets because they’ve built up a lifetime of savings and may be more trusting,” said Cooper. “When my office learns about outfits like these that seek to use people’s life savings to line their own pockets, we’ll take action.”