Also known as a revocable trust, a living trust is a highly beneficial estate planning tool and useful in a wide variety of situations – but trusts do not come without drawbacks. While the pros typically outweigh the cons, it is important for you to consider circumstances in which some of those drawbacks do not strike the positives of using them.
Here are a few examples of those drawbacks.
Cost of a Living Trust
Perhaps the first drawback you are likely to notice and consider is that the cost of using a living trust can be significant, and potentially prohibitive for some people.
Living trusts will require legal assistance to establish. Administering the trust also adds to the expense. If you have a person named to be your trustee, you may need or wish to compensate them for their assistance depending on the size of your estate and the complexity of the trust administration. Keep in mind that if your estate will be subject to probate, that can be expensive and time consuming as well.
When talking to your attorney about the costs associated with creating and administering an living trust, you should compare those expenses to the potential expenses you’d see in the probate process to determine if the trust is worthwhile for you.
Trusts are more complex to create than wills. A will, which is often used in tandem with a living trust, simply handles how items will be distributed to specific individuals. Trusts may include stipulations about intervals and amounts of disbursements, powers the trustee has in trust administration, and various other controls and stipulations.
In addition, all assets to be included in the trust must be legally placed in and titled to the trust, or else they will not be included in the trust upon your death. This adds some extra steps and complexity compared to creating a will.
There is additional record keeping associated with the use of a living trust. If you transfer property in or out of the trust, it is important to keep a written record of this. It is not difficult to do this, but it is an added responsibility that you must consider when establishing the trust.
Most people will find a living trust to be a highly useful tool in their estate planning arsenal for probate avoidance, tax planning, and asset protection – but there are some drawbacks that you should consider before you make the decision to move forward with one.
For more information about how a living trust can benefit your estate, contact an experienced estate planning attorney at Baker Law Group, P.C.
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