From Our “Ask a Question” Mailbag: “What is the downside of a living trust?”
Peter Klenk, Estate Planning Lawyer.
What is the downside of a living trust?
A Revocable Living Trust is a handy tool for some people and a much less helpful tool for others. Most articles spend their time talking about the several advantages brought by a Revocable Trust. Let’s spend some time talking about the negatives.
Cost of Forming the Trust.
Drafting a Revocable Trust costs more than drafting a will. In some states, such as California, New York, and Florida, these costs can be much less than probating a will. The probate process in these states is much more time consuming and expensive. But, in other states such as Pennsylvania and New Jersey, probate is rather inexpensive. The extra cost of form a revocable trust is more difficult to justify in these states. The end cost will depend on the document’s complexity. But, when deciding on whether to use a Revocable Trust, calculate the potential savings.
Cost of Funding the Trust.
A Revocable Living Trust is useless if you don’t fund the trust. For example, if you own real estate, the deed must be changed to name the trust as owner. Preparing and filing a new deed will cost about $1,000.00 a deed, depending on your county’s filing fee. If you have many properties, this is a sizable expense that you avoid by using a Will.
Cost of Maintaining a Trust.
Once formed, the Revocable Trust must be maintained. If you purchase new real estate, you must place the deed into the trust. If you open new bank accounts, they must be set up to utilize the trust. Should you decide to change who receives your property at death, the trust has to be modified.
Too many times, I have had clients come to me with old, unmaintained Revocable Trusts. Beneficiary designations ignored, deeds remain untransferred, and trust terms are hopelessly outdated. They often no longer reduce costs at death; they increase the costs.
Is a Revocable Trust a Good Idea for You?
Revocable Trusts are useful tools for many people. While this article focused on the negatives, consider the positives. Do they outweigh the costs? Start your process by reviewing the pros and cons given your situation when considering my article, Revocable Living Trust: Everything You Need to Know.
In Conclusion: What is the Downside of a Living Trust?
I hope you found helpful this short article addressing the question, What is the Downside of a Living Trust? I have also included some links for more detailed information. If you are curious about Probate, Estate Planning, or other various planning techniques, contact us. Let our Estate Planning lawyers help walk you through what can be a confusing process. In fact, feel free to contact our office for a free consultation.
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