Dear Michael: We went to an estate planning seminar. They brought in a speaker who made quite a presentation with slides about the benefits of living trusts. It sounds like these trusts are head and shoulders above just having a will. However, they did sound like they could get very expensive in comparison to a will. Is there really that much greater benefit to a living trust versus a will? – Been To A Seminar.
Dear Been To A Seminar: Most of these “living trust” seminars tout the fact you can use living trusts to save on everything from probate costs to estate taxes and everything in-between. After you’ve sat through one of these professional presentations, you wonder why everyone doesn’t have a living trust instead of a will. The funny thing is most of them are put on by people who are not lawyers.
First of all, this probably isn’t the first time you’ve heard of something that is “too good to be true.”
In the case of living trusts, the only thing that a living trust might be able to do is avoid probate costs if the conditions are right. Probate costs are made up of your legal debts upon death including but not limited to: Costs of internment, medical bills or costs relating to your death, costs of a service attending your death, any income or estate taxes due, and legal fees for the settlement of your estate.
Most of these seminars promote that you can save on all of these by using a living trust.
However, the only thing that could perhaps be mitigated by having a living trusts versus a regular will would be the legal fees in settling your estate.
When you die, especially on the second death between spouses, all of your liquid assets are placed into an account – your estate account. If you’re working with an attorney, most of the time, the attorney’s office will set up an account for you so your personal representatives can access these funds for use.
With a living trust, whom-ever you nominate as your trustees would do these same things thereby, in theory, eliminating a lot of legal fees, correct?
However, you need to know whether or not your trustees feel comfortable handling all of these duties normally handled by an attorney.
To determine this, get a sample document from the attorney of the living trust in its entirety, which is a fairly lengthy document.
Take this to the person you feel would want to be your trustee(s) and let them spend a week or so reading through this document.
If the person comes back to you and has more questions than answers, then you may have a problem. If you can’t answer those questions for them, then you’ll need to tell your trustee-to-be to talk to the attorney who drafted the document and see if the attorney can explain all of the duties of the trustee.
Sometimes, depending on the author, these living trusts are quite simple or quite complicated. Just do your homework and make certain your trustee can understand exactly what they need to do from the sample living trust document.
Most attorneys have a boiler plate they begin with and then fine tune to your own specifications.
If your trustee-to-be still doesn’t understand his or her duties or feels uncomfortable handling these duties, then perhaps you can look for another trustee or you can just stick with a will.
On the other hand, if your trustee is fairly competent at reading this document, understands their duties, and doesn’t have a problem, then this would be a great money saver to your estate.
Remember, it’s not the document that makes the estate plan great – it’s what you put into the document, how things are going to be handled upon your death, that determine if it’s a great document or not.
If you’re just sold on the idea of the document, then you really have not put everything you need to and want into your plan – whether it’s a living trust or a will.