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? Here are five signs that indicate a living trust could be 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, possible other real estate or mineral interests, and bank accounts, investment accounts, or retirement accounts.
The disposition of these assets on death usually can easily be taken care of by a simple will or beneficiary designations. Unless you have special desires for restrictions on the beneficiary’s access/use of the assets—restrictions which can not be spelled out in a will—a living trust is not needed. An exception to this general principle, and a living trust might be a good idea, is if real estate or mineral interest are owned in different states from Texas.
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, however.
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.
3. Living trusts are not needed by most individuals for estate tax planning.
Unless you have an estate worth more than $11 million per person (the current estate tax exemption), you have no need for a living trust to avoid estate taxes. 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.
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 should also be explored.
4. You have placed your assets 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, you usually really don't need a trust for these assets. Also, the state of Texas has approved a transfer on death deed form to make passage of title to real estate on death much easier.
5. Most probates of properly drawn wills do not require a lengthy process.
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.
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 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*.