Should you trust the living trust?

A potential client called me one day and said she needed me to set up a revocable living trust for her. “Why do you need that particular document?” I asked. “Oh, [insert name of TV pundit] says you must have a living trust to avoid probate.” “And why do you have to avoid probate?” I asked back. “Because [pundit] says that probate is a nightmare and to be avoided at all costs.” I asked the woman if she had ever dealt with probate (“no”) and how many probate [TV pundit] had ever driven (none, since she is not a lawyer). I assured the caller that she had a lot of experience with probate, that it is not the “nightmare” that some would make it seem, and that living trusts are not for everyone. However, the lady was adamant about the trust, refusing to listen to me explain why the trust might not be good for her, or address her legal needs, and hung up on me.

I don’t like losing potential clients, but if they don’t at least listen with an open mind and discuss these heady legal issues with a professional who has experience in this area, then they may not be a good client. The truth is, I would have gladly drawn up a revocable living trust for her, since I would have made more money doing that than traditional estate planning, but before I did, I wanted her to understand all the ramifications of using this legal tool. . She wasn’t interested in hearing what she had to say, and she thought about moving on. This was fine with me.

Revocable living trusts (RLTs) have gained superstar status in some circles in recent years as a way to avoid probate. True, they help prevent succession. Yes are properly configured and managed. They also help avoid guardianship proceedings (more on that in a moment). But what many people don’t understand is that the living trust often creates more problems than it solves: for example, the costs to set up the trust, transfer all assets to the trust, and continue to maintain the trust properly during life. of the grantor. often costs at least as much as the estate, if not more. I often tell clients, “Why should I your pay the administration expenses of your estate? Why don’t you enjoy your money while you’re alive and let those costs be deducted from what your heirs receive later?” Because the truth is, there is no free lunch. Someone is going to pay to transfer your assets to your heirs. .

Also, in my experience as an estate planning attorney who also manages estates, most revocable living trusts I’ve dealt with have No led to a complete avoidance of succession. This often happens because, as time passes, the grantors forget to title the new assets in the name of the trust. After death, when the grantor’s family seeks my advice to liquidate the trust, there are assets that were not included in the trust and we still have to file a probate proceeding. So what problem did the trust solve?

RLTs help avoid guardianship proceedings, but there are problems in this area as well. While the trust appoints a designated person to take over the finances in the event the grantor is no longer able to make decisions, there is no day-to-day oversight of the work they are doing. The only way to enforce or require proper performance is to initiate costly legal proceedings. The guardianship proceeding, on the other hand, is regularly reviewed by the court system at a lower cost.

In short, whether a revocable living trust is right for you is something you should discuss with your attorney. Keep an open mind and explore all of your options with a member of your state’s Bar Association, preferably someone who regularly practices law in this area.