1. Trust can be so expensive. Yes (and No), initially when you receive the bill from your attorney it seems like a lot of money for some papers, but what is the alternative? Having a Will which leads to probate, maybe your wishes not being followed, heirs not receiving assets when needed, your estate made public, and paying unnecessary taxes are just a few problems. Probate can cost anywhere from 3% to 8% of the total of all your assets that would go to probate which include court cost, attorney fees, appraisals, taxes, etc. If you own real property in different states your assets need to go through probate in every state you own real property. If you become incapacitated a Will does nothing and your family would need to go to Court to become your guardian which causes attorney fees, court cost, wasted time, and stress on your family. Once you add up all of those cost – Living Trust are a lot less expensive then probate and guardianship cost!
2. Trust are only for the wealthy. No, in the past many wealthy people have used a trust for tax advantages; however, trust are meant for everyone. As stated in #1 above, 3% to 8% of the total of all of your assets value go to cost, that will eat up a lot of your assets in a small estate. Wouldn’t you want those assets to go to your beneficiaries and not for cost of probate?
3. Living Trust protect my assets from creditor. No, a living trust is revocable/amendable which means you are able to change the terms of the trust, put assets into the trust, and take assets out of the trust without getting permission from anyone. This type of trust uses your social security number to hold all the assets. Because you are able to amend the terms of the trust and the trust uses your social security number, this type of trust will not protect your assets from bankruptcy, creditors, divorce, or court proceedings. Trust that protect assets are irrevocable trust, not revocable.
4. Living Trust protects my assets from Medicaid and the Nursing Home. No, a living trust does not protect your assets from Medicaid and the Nursing Home. For more details see #3 above.
5. I don’t need to fund my trust. No, funding the trust means you are transferring ownership of assets into the name of the trust or you are making the trust a beneficiary of an asset. If you do not title assets in the name of the trust, the trust become a document that does nothing. The trust only controls assets that it owns (retitled to it) or that it acquires because it is a beneficiary of an asset. If assets are left in your name and not the trust, those assets will need to go to probate court and the court will retitle the asset to the trust. Going to probate court is a waste of time and money. The assets should be retitled during your lifetime. If the assets are not retitled, like some financial assets (IRAs), then the trust should be the beneficiary of those assets when you pass, so the asset does not go to probate court. You should always have a “pour over” Will. A pour over Will catches any assets that you forgot to change title too or list the trust as a beneficiary. The Will basically tell the judge that you have a trust you would like the assets to be transferred to so that the asset doesn’t get held up in probate court.
6. A Trust will handle all my finances and medical decision needed. No, trust will only handle any assets that the trust owns. If any assets remain in your own individual name (including joint ownership) the trust may not make any decision regarding those assets. You will still need a Durable Power of Attorney for Finance/Real Estate. Also, a trust will not be able to make any decisions regarding your health and medical issues. You will need a Health Care Power of Attorney for all of your medical needs.
7. If I have a Trust I will lose control of my assets. No, normally you are the trustee of the trust (person who manages the trust’s assets) and you are able to amend the trust (change the terms of the trust) as much as you would like. You are able to treat the assets as you did before you put the assets into the trust. A revocable trust uses your social security number. You are able to control your assets under one plan. If you decide to make a change regarding your estate, normally you only have to change the terms of the trust.
8. What are some problems with a Trust? Many times people want to take a cheaper route by getting the documents online. They will not read the documents so they do not understand what a trust is, how to use a trust, or even that they need to fund the trust. They do not know how to pick successor trustees or they might not even list a successor trustee at all. Most of the time, trust are set up and never looked at again. Just like all estate planning documents, trusts need to be reviewed and changes need to be made over time. As your life changes so should the terms of your trust. Not having a properly prepared trust is a waste of time and money, this is why you need an attorney to prepare a trust. An attorney will discuss your own individual needs, the needs of your beneficiaries, and keep up with the current laws.
9. What are some of the advantages of having a trust? During your lifetime you are in control of the trust’s assets, if you become incapacitated your successor trustee will take over control without first having to go to court. A trust allows you to “control” your assets from the grave. You are allowed to say when, how, and under what circumstances your beneficiaries are able to receive the assets. A trusts are harder to contest, the terms remain private, and there will be no probate or multiple probates if you own property in more than one state.
Trusts are a great estate planning tool. However, you will need to hire a qualified estate planning attorney who will work with your accountant and financial advisor to make sure that the trust is properly draft so that it manages all of your needs now and in the future.