Living Trusts
Please note that a Living Trust is NOT a substitute for a Will. The tax
advantages of living trusts are generally available through Wills. Revocable
Living Trusts DO NOT ELIMINATE the need to pay inheritance or estate tax, or
personal or estate income tax. They do not freeze out your creditors.
A Living Trust does not generally eliminate probate delays, since most delays
involve paying creditors, paying state and federal taxes, and getting clearance
or closing letters from the tax authorities. Life insurance and social security
benefits might also need to be resolved. Sometimes lawsuits will be prosecuted
or defended. Living trusts also do not avoid attorney's fees. An attorney is not
required for probate, but is desirable; it is just as desirable for living
trusts.
Living Trusts are advantageous, overall, only in a relatively small number of
cases, primarily to ensure continuity in running a business, and occasionally to
avoid ancillary proceedings when real estate is owned in other states. In
general, living trusts are no panacea, do not avoid taxes and fees, and
do not eliminate the need to have a will. Living trusts also, obviously, are
expensive to properly fund and to ensure that assets are correctly retitled.
It is often stated that living trusts provide an element of privacy that is
lacking for wills. However, recent court decisions have held that if a trust
beneficiary petitions the Probate Court for an accounting, then both the trust
instrument and the accounting become public documents in the court file. In
other words, a revocable living trust does not guarantee privacy. In short: The
expense of a Living Trust is justified only in a relatively small number of
cases. Suggestion: Get a second opinion!
I once saved an elderly couple $3,500.00. They asked my opinion on whether they
needed a living trust that was touted to them at a seminar. I asked what their
goals were. They told me, and then showed me their current Wills. The Wills met
their goals in all respects. I charged them $50.00 for this opinion. They
thanked me, and left with a net savings of $3,450.00. Again: before spending
lots of money, get a second opinion.
Finally, an excellent law review article about living trusts has been published.
See "The Living Trust: Fact vs. Fiction", in Vol. 15, No.1-2 of the Quinnipiac
Probate Law Journal (2000). I will show a copy of the article to any client who
wants to discuss living trusts -- no charge. This article dispels many of the
myths associated with living trusts. There is a local law
firm that regularly offers living trust seminars “free of charge.” Their ads
state that AARP, in 1989, condemned the probate system as slow and costly.
Perhaps AARP did do that, but that doesn’t make the charges true. The
Connecticut probate system predates the Revolution, and has helped thousands of
people far more quickly and inexpensively than the Superior Court would. The
ads also fail to state that, even with a living trust, you will also need a
will: that is mentioned after you are already “hooked.” Further, the ad implies
that a living trust provides tax savings, while neglecting to mention that a
will does the same thing.
But it’s your decision. All I ask is that you get a second
opinion before committing thousands of dollars and then finding out that you
needed a will anyway.
^ Top
|