[ad_1]
A prospective client called one day, stating she needed me to draft 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 in order to avoid probate.” “And why do you have to avoid probate?” I asked in response. “Because [pundit] says probate is a nightmare and you must avoid probate at all costs.” I asked the woman if she had ever dealt with probate before (“no”) and how many probate estates [TV pundit] had ever handled (none, since she is not a lawyer). I assured this caller that I had a lot of experience with probate, that it is not the “nightmare” some would make it seem, and that living trusts are not for everybody. The lady was nonetheless adamant about the trust, she refused to listen to me explain why the trust might not be good for her — or address her legal needs — and she hung up the phone on me.
I don’t like losing prospective clients, but if they do not at least listen with an open mind and discuss these heady legal issues with a professional who has expertise in this area, then perhaps they will not be a good client. The truth is, I would have gladly drafted 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 was not interested in hearing what I had to say, and she chose to move on. This was alright with me.
Revocable living trusts (RLTs) have gained superstar status in some circles in recent years as a way to avoid probate. It is true, they do help avoid probate — if they are set up and administered properly. They also help avoid guardianship proceedings (more on that in a moment). But what many people do not understand is that often the living trust creates more problems than it solves: For example, the costs to set up the trust, transfer all the assets into the trust, and continue to maintain the trust properly over the Grantor’s lifetime often costs at least as much as probate, if not more. I often say to clients, “Why should you pay the costs to administer your estate? Why don’t you enjoy your money while you’re alive and let those costs come off of what your heirs receive later?” Because the truth is, there is no free lunch. Somebody is going to pay for transferring your assets to your heirs.
Additionally, in my experience as an estate planning lawyer who also administers estates, most of the revocable living trusts I’ve dealt with have not led to a complete avoidance of probate. This often occurs because, as time goes on, Grantors forget to title new assets in the trust’s name. After death, when the Grantor’s family seeks my counsel in winding down the trust, there are assets that did not make it into the trust and we still have to file a probate proceeding. So what problem did the trust solve?
RLTs do help avoid guardianship proceedings, but there are problems in this area, too. While the trust appoints a designated person to take over finances if and when the Grantor can no longer make decisions, there is no day-to-day oversight on the job they’re doing. The only way to enforce compliance or demand proper performance is to bring an expensive litigation proceeding. The guardianship proceeding, on the other hand, is regularly scrutinized by the court system at a lower cost.
In summary, whether the revocable living trust is right for you is something you must discuss with your attorney. Keep an open mind and explore all your options with a member of the Bar of your state, preferably someone who regularly practices law in this area.
[ad_2]
Source by Joanne Fanizza