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JohnDough

Living Trusts

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That's a mighty wide question that could take pages to respond to.  I suggest that you do a search.  You will find reams of information.

 

(But, I will say that the probable #1 motivation for most people creating living trusts is the desire to avoid probate.)

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Thanks harrylime, but aren't there certain salient issues which might narrow the focus of a search?   I will certainly take your suggestion and do a search, though I was hoping that this site might obviate my need for a general search and give me something specific to look for.

 

JD

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A major disadvantage of a living trust is the cost associated with its preparation and funding. The paperwork is more complex for a living trust than for a will and the attorney's fee is typically larger. Property that passes by title, for example, real estate and vehicles, has to be transferred formally from individual ownership to trust ownership. Beneficiary designations to property such as insurance policies and bank accounts may also need to be changed. For an estate with fairly extensive property and complex dispositions, the cost of preparing and funding a living trust can be two or three times the cost of a will with equivalent dispositions. People who choose a living trust over a will are essentially doing much of their own probate before their death, similar to the way that some people plan their own funerals. As a result, they are paying costs and performing work now that would otherwise be deferred until after death and then paid by their estate and performed by their Personal Representative. There is nothing wrong with this of course, as long as a person realizes that is what he is doing.

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Thank you goonbolt.

 

It appears the "major disadvantage" of a living trust is the same as not having a living trust; i.e., the attorney's fees.  As I understand it, probate attorneys take "a piece of the action", so it's probably better to spend the money now on a living trust than to subject my wife and/or heirs to a Hobson's choice after I'm history.  As far as transferring property titles, bank accounts, beneficiaries for insurance policies, as well as other assets, it is merely a matter of doing the work, which I believe I can do myself.  As for "complex dispositions", I don't know what that term means, but since I will be paying a lawyer one way or the other, maybe I can get a definition thrown in for the price and then get to work on that as well.

 

Thanks again to goonbolt and harrylime.   :) 

 

I welcome anyone else's response ...

 

JD

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Whether probate is expensive depends on the details of the estate in question and in what state(s) the probate would be done. Trust promoters make it seem like trusts the are solution for every estate plan, and it’s simply not the case that trusts work the best for everyone. In some of the jursidictions I’m familiar with, probate is expensive and takes a long time, and in those states trusts are very common estate planning devices. In other jurisdictions, including where I practice, probate is not very expensive for most estates, and can be handled easily within in a year for most estates. In those states, trusts are not as commonly used, but there are still some clients for whom trusts do work well.

 

One of the biggest factors in cost for probate or a trust is whether any disppointed heir contests the will or trust, and that problem can exist regardless of which way you go. Reducing that risk is more an issue of careful drafting of the documents, ensuring proper execution of them, and if need be getting and preserving evidence that the maker of the will or trust was competent at the time the documents are executed. These are things that a well experienced estate planning attorney can help with. 

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Not much to add to what the others have said -- particularly "harrylime."  Because of their generality, all of the initial questions asked are better suited for googling than a message board.

 

Keep in mind, however, that not all "living trusts" are created for estate planning purposes.  Obviously, the cost of anything like this is a factor in deciding whether or not to do it, but comparing the cost of creating a "living trust" to the cost of probating an estate could be a little like comparing apples and potatoes.

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Thanks to everyone.  


 


It appears I have a lot of homework to do, though I'm not so sure googling is the way to go.  I'm intrigued by the comment that comparing the cost of probating an estate to the cost of having a trust created is like comparing apples and potatoes.  I can't say the two are not commensurable.  With the cost of probate proportionally related to the aggregate value of the assets being probated, it seems like a no-brainer to pre-probate as much as possible before it is necessary.  


 


JD

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With the cost of probate proportionally related to the aggregate value of the assets being probated, it seems like a no-brainer to pre-probate as much as possible before it is necessary.  

 

 

Again, this depends on the state of probate and the details of the estate. It's true that in some states, the fees of executors and perhaps other professionals are based on some percentage of the value of the estate, that is not true in every state. Where I practice, that is not how fees are set. They are set based on the actual work done. I've had very large estates that had mostly financial assets (bank accounts, CDs, pensions, investments) with a clear will and no contests filed by anyone that did not cost the estate all that much to probate and probate was done pretty quickly. I've had other estates, much smaller in size, that cost much more because there was real estate and other assets that were more time consuming to deal with and because there were endless court fights due to relatives that did not get along. 

 

Note that whether by probate or through a trust, a number of expenses are going to be the same: funeral expenses, taxes, accounting fees, certain basic legal expenses, etc., are going to be incurred no matter what. 

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