Living Trust Concerns

| Oct 14, 2011 | Estate Planning |

Do you have a large red or green binder labeled “Revocable Living Trust”? If so, you should pay attention to this post. A few years ago a handful of organizations began using a high pressure sales approach to marketing expensive trusts called “Revocable Living Trusts.” They promised to save taxes, attorneys’ fees and to keep your estate out of probate. They usually staged “free” seminars that led people to sign up for their packages. Most people who bought them haven’t a clue what they say. Sometimes, as a trained lawyer, I have trouble interpreting them. The binders contain tab after tab of important looking legal documents. The problem you will encounter is that if you call the organization or lawyer that prepared the trust, more often than not, they are out of business or can’t be found. What’s more, if you become disabled or die, those documents you don’t understand will control your affairs.
Sadly, the promise of most of those trusts will not be fulfilled. Most people want a relatively simple plan, yet most of the trusts I review contain highly complex schemes for distributing estates to unnecessary sub-trusts that endure for years and limit the access of survivors to funds they often need for making ends meet. They contain elaborate formulas for avoiding taxes you will never have to pay. More often than not, key assets have been left out of the trust, because no one ever helped you make the necessary transfers to fund the trust in the first place. The mere statement in the document that “I transfer all of my assets to the trust” is insufficient to make that happen. Deeds and title transfer documents need to be prepared, signed and recorded. Otherwise, at your death, your heirs will be faced with the need to probate your estate plus the daunting task of administering your complicated trust. The end result is likely not what you intended, and is a far cry from what you were promised.
I hasten to add that in the right situation, a Revocable Living Trust can be the perfect solution. Properly drafted and funded trusts can work well. If a lawyer you know and work with has prepared your trust, and you have been faithful to keep it funded and up to date, then you are probably fine. My concern is primarily for those who bought trust packages through “trust mills” that pump out expensive, one-size fits all packages. Still, even if your trust was properly set up and funded in the first place, it needs to be maintained and updated to remain relevant.
So what should you do? First, don’t ignore it in hopes it will correct itself. It won’t. You have to take action to make sure your estate plan is set up the way it should be. Second, make an appointment with an estate planning lawyer in your area, preferably one who will be there when you need help, to review what you have, explain it to you, and figure out whether it meets your needs. It may need only a correction or two, or you may decide to abandon it altogether and do something simpler and better suited to your needs. Estate planning is like a tailored suit. All of them have the same basic elements – but each is uniquely fitted to the wearer. Third, pass this on to your friends who got those trusts. Estate planning is easy to procrastinate, but the stakes are very high for you and your loved ones.