Is A Living
Trust For You?
Bob Mason
Originally
published in Coastal Senior
(October 2007)
Down in the corner next to
the obituaries sits the ad.
The next day it pops up
opposite the Opinions
section.
FREE SEMINAR! FREE
LUNCH! PROTECT YOUR ASSETS!
Then the ad goes on to scare
the daylights out of you.
How on earth could that
dunderhead lawyer of yours
have not given you such
IMPORTANT INFORMATION?
The ad tells you that with a
Living Trust you can
–
·
Avoid Probate!
·
Avoid Triple Taxation!
·
Maintain Confidentiality!
·
Leave Your Estate To Those
YOU love (and NOT –gasp- to
those the State chooses)!
·
Manage Your Affairs If You
Become Incapacitated!
Living trusts, revocable
trusts, life trust, family
protection trust. They come
with different names. My
favorite slang term is “The
$3,000 Notebook”. If you
have a black notebook with
tabs in it containing a
bunch of documents you don’t
really understand for which
you paid thousands after
attending a free seminar –
you may be the owner of a
$3,000 Notebook.
A living trust is a trust
that you set up (maybe
jointly with a spouse)
usually naming yourself as
trustee. The trust says you
can freely put assets in and
take assets out. There will
be provisions that detail
how your estate (or whatever
you’ve put in the trust)
will pass when you do (pass,
that is). If you have a big
estate (say, north of $2
million) there should be
some tax planning provisions
in there. Of course, I’ve
seen people with modest
estates that have bought
trusts containing tax
provisions that would do
Warren Buffet proud.
Look back at the list of
commonly advertised claims
above. I’ll take them one at
a time. First, YES, you can
accomplish all of those
things with a living trust.
But other than avoiding
probate and maintaining
strict confidentiality, you
can also accomplish all of
those goals with a will.
Probate is the process
available in all states by
which a court (in Georgia it
is the Probate Court)
supervises the collection of
estate assets, the payment
of creditors and final
distribution of assets. It
applies to “probate” assets
only.
A bank account solely in my
name is likely going to be a
probate asset when I die.
It’ll go to whomever I name
in a will, or if I don’t
have a will (meaning I’ve
died intestate) to whomever
the rules say, perhaps split
between my wife and child.
On the other hand, a bank
account that says “Pay Ann
on Bob’s death” will be a
nonprobate asset because it
doesn’t matter what my will
says or what the intestate
rules say (Ann will get the
bank account even if my will
leaves everything to my
child). Likewise, a living
trust is a nonprobate asset
because anything in it will
pass without regard to a
will or the rules of
intestate succession.
Remember: Intestate means
“without a will.” Which
reminds me of the following
encounter with a client.
“I’m so sorry about your
Daddy, Wanda. Did he die
intestate?” “No, Mr. Mason,
he died over in South
Carolina.” Bad joke.
Couldn’t help it.
In some states the probate
process is a bit like a
head-on collision with an
18-wheeler on I-95.
Something you ought to try
to avoid if possible. A
properly drafted and funded
living trust is a good way
to avoid that (probate, not
the collision).
Georgia,
on the other hand, has a
user-friendly probate
process. By this I mean the
probate process is often
cheaper and easier than
establishing and tending to
a living trust. Often it
just doesn’t make sense to
set up a living trust simply
to avoid probate.
Next claim: Avoid triple
taxation. If you have an
estate worth less than $2
million, you won’t have
any estate tax (unless
you gifted millions while
you were alive). It doesn’t
matter whether you have a
trust or a will or nothing.
If you have a larger estate,
a living trust has NO tax
advantage over a will. If
you are worth more than $2
million why are you at a
free-lunch-seminar?
Next claim: Maintain
confidentiality. Fair
enough. The probate process
is public. You can go down
to the courthouse and insist
on reviewing an estate file
if you’re so inclined. Most
people don’t care.
Next claim: Leave your
estate to those you choose,
not to those the state
selects. You can do that
with a will. In fact, it is
simpler with a will. The
worst you can do is nothing,
however. Remember, if you
die without doing anything,
the kids will get a cut
along with Mama.
Final claim: Manage you
affairs if you become
incapacitated. True, a
living trust can help. But
so can a power of attorney
at a fraction of the cost.
Last caution: Living trusts
do nothing for asset
protection. Zero.
All that being said, living
trusts or revocable trusts
can sometimes be useful.
Extremely so, in fact. If
your trusted attorney
recommends a revocable or
living trust and can give
you some solid reasons to
backup the recommendation,
then by all means listen to
her. She knows your
situation better than
someone who fed you a free
lunch.
Bob Mason, certified elder
law attorney by the National
Elder Law Foundation,
practices in Savannah,
Georgia, and Asheboro, North
Carolina. Email Bob at ram@masonlawpc.com or visit www.masonlawpc.com.
