One of the most popular documents these days for leaving an inheritance to beneficiaries is a family revocable living trust. It’s similar to a Will, but many attorneys everywhere are preparing them for their clients. Are trusts really the way to go for many families? Let’s take a look at the advantages of a living trust, and explore if there are any significant disadvantages.
Living Trust Advantages
Avoids Probate
If you haven’t heard of probate, it’s a court process designed to legally distribute a person’s assets after they have passed away. Since it’s a court process, with judges and attorneys involved, it’s usually not easy to get through. Probating a loved one’s estate in many states can be very expensive. There are all kinds of fees. Attorney fees, court filing fees, executor fees, appraisal fees, etc. These fees may range from 4% to 5% or more of the total estate value being probated. Now, 4% to 5% does not seem like much, but let’s look at an example of how that cost adds up. Let’s say a person has a modest estate with a small home, furnishings, an average car, and some savings. When added up together this person’s estate totals $500,000. 4% of $500,000 is twenty thousand dollars, and 5% is twenty-five thousand dollars. Twenty-five thousand dollars is a lot of money to spend on probate, instead of that money going to the beneficiaries who need and deserve it more. It also takes time to get through the whole probate process. Six months to two years or more is not uncommon to get through probate. Most assets are tied up and cannot be touched or used while in the probate process. If a person dies without any written instructions, this is known as dying “intestate” with no named beneficiaries, and probate is then required. Because of the low threshold of a person’s qualifying estate value, many families wind up in probate even though the deceased person wrote out a Will. However, living trusts use unique legal language that allows this entire probate mess to be avoided. Assets passed through living trusts do not require probate, saving money and a ton of time. The assets get transferred directly to beneficiaries simply using the living trust documents themselves.Control And Flexibility
When a person or married couple creates a living trust, they give up legal ownership of their assets to the living trust. For example, John and Mary Smith would create “The Smith Family Trust” and transfer title of most everything they own to their trust. However, since John and Mary own their trust, they are also in total control of all the trust’s assets. They can buy and sell real estate, open savings accounts, invest in the market, etc. just like they did before creating their trust, and just as easily as well. They do this as the “Trustees” of their trust. John and Mary can also add or remove beneficiaries, or make any other changes to their trust during their lifetimes. It’s these reasons they are known as “revocable” living trusts, which gives the advantage for the ability to change as life changes over the course of time. A new trust is not needed, it is just simply modified as desired.Distribution To Beneficiaries
With or without a Will, once a beneficiary receives their inheritance they are free to do whatever they want with it. They can spend it all and blow their inheritance after the estate gets through probate. However, a living trust can have terms and provisions added to control the distribution to beneficiaries. Amounts can be set up to be distributed over time (like a payment plan) to beneficiaries that are known for poor investment decisions. Amounts can be held until a beneficiary attains a certain age, or even make a beneficiary achieve a college degree to obtain their inheritance. A living trust has the advantage that pretty much whatever the desires for distribution may be, an attorney can usually draft provisions to make them happen; even for distribution to charities or pets like dogs and cats.Avoids Family Conflicts
Immediately upon death, the living trust becomes irrevocable. This is a great advantage as it gives a person peace of mind on what they want to have happen, will happen. The beneficiaries, the amounts directed to pay out and to whom, anyone disinherited and special gifts to certain individuals cannot be changed. And guess what? Since nothing can be changed after death, there is nothing to fight over. Families or other interested parties in most all cases cannot contest a living trust. This means no family fighting. Some disgruntled beneficiaries or in-laws may not be happy with what was left to them, but they cannot fight about it. A tremendous and often overlooked living trust advantage is that it keeps peace in the family.Living Trust Disadvantages
Time And Effort
Gathering up documents can be a little time-consuming when setting out to create a living trust. And, after creating a trust it has to be funded. “Funding” is simply transferring ownership of all the major assets into the name of the trust. It’s much easier these days compared to 25 years ago. Most financial institutions nowadays have many customers with living trusts and are familiar with the procedures to fund an asset. Usually, just a form or two will get the job done. Obviously, the more assets a person owns will cause this process to take longer than others. Generally, attorneys charge significantly more than the cost of a Will to create a living trust. But, when considering the benefit of avoiding probate costs, it’s well worth it for many families. It is common for local attorneys to charge approximately $1,500 to $3,000 or more to create a revocable living trust. Do-It-Yourself programs such as Legal Zoom are risky since no attorney is involved and they even charge around $900 or more for all the documents (and notarization) required in a complete living trust portfolio. Some attorneys charge less, but usually provide the basics and not everything a complete portfolio would provide.Best of Both Worlds
Years ago, our association made a significant effort to analyze the process and cost of obtaining a living trust. We looked at the inefficiencies of local attorneys, and many of the unnecessary steps they commonly require their clients to go through to create a living trust. We believe, in conjunction with our plan attorneys and notary providers, we developed a better way. If you are interested in obtaining a complete living trust portfolio in a simple and easy manner right from the comfort of your own home, please >watch our online presentation. In less than 45 minutes you will learn just how easy it is to understand how a living trust works, and how you can obtain one for the low flat rate price of only $599. There are no hidden fees, the attorney is very experienced having prepared over 24,000 trusts since 1988, and notarization is also included in that low price. Simply click here to watch our free online presentation and learn how over 17,000 families ended their procrastination and got the documents they needed in place.Learn How To Obain an Affordable Living Trust for $599 + BONUSES
Watch our free educational video by clicking below.
– OR –
This area of the website is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of the author, not of the National Association of Family Services, and have not been evaluated by the National Association of Family Services for accuracy, completeness, or changes in the law.