Do You Need A Living Trust?

A few weeks ago I came across a full page ad in our local paper promoting a seminar on living trusts. Reading it, I started shaking my head in disagreement. Many of my clients and seminar attendees think that a trust is what they need. When I probe and ask why, they can't really give a good answer, it is "just something I've heard". Why have they heard this -- the skeptic in me says "because living trusts are lucrative for the people who draft them". In my practice, very few clients need a living revocable trust.

The ad criticizes wills because

• attorneys are needed, well attorneys are needed in the creation an often the administration of trusts;
• expensive probate fees. In Wisconsin, the probate fee is .02 percent, or $2 for every $1,000 in probate assets. Often times the probate fee is less than the cost of creating and funding a trust;
• totally public and court controlled. In some cases, this is advantageous. When a trust is involved, there is no court oversight to ensure that beneficiaries receive the proper distribution -- what if the named trustee opts to not send a check to the non-profit listed -- I've heard of this happening.

Living Trusts do have there place. Here are a few situations when I feel a client should consider a living trust:

• a desire to keep finances private; ideal for blended families or business owners;
• when property is owned in multiple states AND no other non-probate options are available, such as Transfer on Death Deeds; and
  
• when there is a desire for an asset to be held in trust, managed by a trustee, for a long-term basis (i.e. 5 years or more).

Remember, living revocable trusts will not minimize your estate taxes or preserve assets if you need long-term care.

Transforming a probate asset into a non-probate asset can be achieved by multiple instruments, most of which are less expensive than a living revocable trust. Be certain to consider all of your options -- and ask for a cost benefit analysis to ensure that you are in fact saving money if that is your primary goal.