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TO TRUST OR NOT TO TRUST - DO YOU REALLY NEED A REVOCABLE LIVING TRUST?

by Adair Melinsky Buckner on Sep. 23, 2013

Estate Trusts Estate Estate  Estate Planning 

Summary: Whether a Trust is a good Estate Planning tool or not.

Should you have a trustEspecially for older folks, you may be bombarded with sales pitches for setting up or buying living trusts by telemarketers, mail solicitations, “free” seminars, and advertisements. This has been a favorite area for consumer fraud in recent years, resulting in huge sums of unnecessary expense for unsuspecting consumers. The revocable living trusts are usually touted as the way for you to avoid huge probate expenses, long delays in probate, or other scare tactics. BUYER BEWARE! 

  1. Probate Is Not That Expensive If You Have A Good Will and Competent Counsel. Often the price charged by both non-lawyers and lawyers for creation of, funding, transfers to, and related documents for a revocable living trust will far exceed the cost of probate for a will that was properly drawn up to provide for independent administration. Competent counsel will also explore with heirs whether there is any alternative to a full probate to accomplish the transfer of assets desired.
  2. Living Trusts Are Not Needed By Most Individuals For Estate Tax Planning Now. After the last Congress raised the minimum taxable value of an estate to in excess of $5 million per person, and Texas follows the federal tax guidelines, very few Texans have reason to seek estate tax savings by setting up a living trust. Even if you do have an estate large enough to trigger estate tax considerations, you do not have to have a living trust to minimize estate tax liability.
  3. You Can Avoid Probate Of Many Types of Assets By Placing Them In Joint Tenancy With Right Of Survivorship, Or Making Beneficiary Or Payable on Death Designations. In fact, this is probably a much simpler way of passing on these assets on death 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.
  4. Living Trusts Will Not Allow You To Qualify For Medicaid Or Shelter Your Assets From Medicaid Recovery Upon Death. Some living trust salespeople blatantly lie about these issues to generate business. Placing your homestead in a living trust may (although it is not certain) keep Medicaid from attaching a lien to the property for recovery, but putting it in a revocable trust causes it to lose exempt status for Medicaid purposes and the person who placed the homestead in a revocable trust may lose Medicaid qualification as a result.
  5. Most Probates Of Properly Drawn Wills Do Not Require A Lengthy Process. The Texas Probate Code continues to be modified to streamline and speed up the probate process and only 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.
  6. If Assets Are Not Monitored And Added To The Trust As They Are Acquired, The Purpose of Having a Living Trust Can Be Defeated.  Individuals who do set up a revocable living trust have to be careful to keep up on a routine basis with assuring that all assets they want subject to the trust are transferred to it or title acquired in the name of the trust. Otherwise, a probate in addition to the trust may be necessary to transfer the title and the expense is multiplied.
WHEN IS IT A GOOD IDEA TO LOOK AT CREATING A REVOCABLE LIVING TRUST?

  1. If You Own Real Property Or Oil And Gas Interests In States In Addition To Texas. One of the best uses of a revocable living trust is to make it easy to pass title to real estate or oil and gas interests held in Oklahoma, New Mexico, Colorado, or any other state in addition to Texas.  Without title being held to such assets in the living trust, you might be compelled to probate a will in all the different states in which such assets exist. Not all states have as simplified a probate process as Texas and they in fact may be much more expensive than Texas’s. In this instance, there really may be substantial savings realized by placing these assets in a living trust.
  2. If You Need Special Assistance In Managing Assets. Although this same help can be achieved to a large extent through a Power of Attorney, maybe a co-trustee acting with you under a revocable living trust is the best way to allow you to remain involved but gain the help you need in managing your assets, particularly if ill health is your hindrance rather than incompetence. You can designate a knowledgeable person or firm to aid you in handling the assets of the trust.

MAKE AN INFORMED, REASONED DECISION ABOUT WHETHER A LIVING TRUST IS RIGHT FOR YOU. SEEK OUT AN ATTORNEY WITH KNOWLEDGE OF TEXAS LAW TO DRAFT THE DOCUMENTS. AVOID USING STANDARD FORMS, KITS, OR COMPUTER SOFTWARE THAT IS ONE-SIZE-FITS-ALL.

To learn more about Adair and her practice visit her profile page and her Estate Planning & Probate Law page.

photo credit: LOSINPUN via photopin cc

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