One of my biggest pet peeves over the years has been the over-selling of living trust packages to folks doing their estate planning. There are definitely times when a living trust is a good estate planning tool. However, for many individuals a living trust is an unnecessary expense.
Beware of the estate planning person who tries to sell you on a living trust without even exploring your assets and estate planning needs. Otherwise, you could end up paying a large sum for something you don’t need.
So how can you determine whether you truly do need a living trust? Typically, living trusts are only needed for more complicated estates, where you own real property in different states, or privacy concerns. To see where a living trust might be appropriate, see this blog.
Here are five signs that you do not need a living trust and drawing one up is probably a waste of money.
5 Reasons A Living Trust Might Not Be Necessary
1. Your assets are transferable without the complexity of a trust.
For the majority of people, the assets they own consist of a home, personal property, other real estate or mineral interests, and bank accounts, investment accounts, or retirement accounts.
The disposition of these assets on death usually can be taken care of easily by a simple Will, beneficiary designations, or a transfer on death or "Lady Bird Deed" (for real property). A living trust is not needed unless you have special desires for restrictions on the beneficiary’s access/use of the assets—restrictions which you do not want to spell out in a Will, which must be filed of public record for probate.
An exception to this general principle, when a living trust might be a good idea, is when real estate or mineral interests are owned in different states from Texas. In this instance, a living trust holding these assets may avoid multiple probates in different states.
2. Probate is not that expensive if you have a good Will and competent counsel.
A living trust often is promoted as a way to save "all the expenses of a probate." Often the price charged for the creation of a revocable living trust, funding, transfers, and related documents will far exceed the cost of probate for a Will that was properly drawn up to provide for independent administration. The creation and funding process for a living trust usually is several thousand dollars. A simple probate generally would be about $1000.
Competent counsel will also explore with heirs whether there is any alternative to accomplish the transfer of assets desired—without the expense of a full probate. Texas allows several simplified probate procedures which might cost even less than $1000.
3. Living trusts are not needed by most individuals for estate tax planning.
Living trusts are frequently oversold as an estate tax avoidance planning tool. Unless you have an estate worth more than $11.5 million per person (the current estate tax exemption), you have no need for a living trust to avoid estate taxes! Most of us are not fortunate enough to be in that category.
Estate tax savings through complicated trust arrangements were a key reason to have a living trust in the past, when the estate tax threshold was much lower. That motivation no longer exists. These complicated former estate tax saving plans now do nothing but complicate administration of what otherwise might be a much simpler estate.
Even if you do have an estate large enough to trigger estate tax considerations, you do not always have to have a living trust to minimize estate tax liability. Gifting and other estate tax avoidance also should be explored with your attorney.
4. Your assets have been placed in joint tenancy with right of survivorship, beneficiary or payable-on-death designations.
This is a much simpler way of passing on many assets upon death rather than placing them in a living trust. We urge clients to place as many assets as they can in this form of ownership or beneficiary designation if they want them to pass immediately on their death to someone else.
Unless the beneficiaries are minors or have special needs, or you want to place restrictions on their use of or access to the funds, you really don't need a trust for these assets. Also, the state of Texas has approved a transfer on death or Lady Bird Deed form to make passage of title to real estate on death much easier. This deed even allows your beneficiaries to receive the property without probate. You definitely should explore this as an estate planning tool with your attorney.
5. Most probates of properly drawn Wills do not require a lengthy process.
Living trusts also have been promoted as a way to avoid the "lengthy probate process". This is really not a valid justification for the expense of a living trust in Texas unless there are other valid reasons to create a trust.
The Texas Estates Code continues to be modified to streamline and speed up the probate process. Rarely would lengthy delays be involved in passing on assets through probate. The usual probate of a simple estate can be concluded in a few months. Administering a living trust easily could take that long.
An independent administration under a well-drawn Will requires only one hearing and minimal court involvement in the process thereafter. A competent, conscientious executor will move the process along quickly unless there are unusual complications.
If you still feel a living trust might be right for you, please download the living trust questionnaire and contact Adair M. Buckner to discuss your situation.
If you are needing to discuss estate planning that is appropriate for you, please Contact Adair M. Buckner using the button below to schedule a free initial consultation*.