Revocable Living Trust Cost- Setting up a trust requires serious legal assistance, in which isn’t cheap. A typical living trust may cost $2,000+, whereas your basic last will and testament can be created for around $150 or so.
Advantages of the Living Trust
Avoiding probate is the primary advantage of setting up a living trust, but other advantages such as privacy protection and adaptability make it a wise choice.
Avoidance of Probate
Probate is a legal process for the transference of your property when you pass away. It has the requirement of submitting documentation to a probate court and undertaking a multistep process – or processes when you have assets and/or property in different states. Setting up a revocable living trust avoids costly probate proceedings, enabling assets to be transferred to beneficiaries quicker. Assets designated in the trust bypass the expensive courts and usually take priority over the property designated in the will.
Changeable and Flexible
The living trust enables you to make alterations (or amendments) to your trust document when you are still living, as you see fit.
Privacy Preservation
Revocable trusts are a wise choice for those worried about retaining records and details about assets private following your passing. Probate processes that wills are affected by can make your estate an open-book since documents entered in it becomes public record.
Eliminate Challenges to the Estate
A standard will could create family disputes at your passing and be contested for modification by any members of your family. By using a trust, you can dis-inherit anyone that questions your wishes when you pass.
Separation of Assets
This is valuable for married couples that have significant separate property that was obtained before the marriage. The trust can help separate those assets from the joint property assets.
Assignment of Durable Power of Attorney/Guardianship
Living trusts can be used to assist in controlling a guardian’s overspending for the benefit of any minor children. It can also allow another individual to act on your behalf should you become debilitated and require someone in making decisions for you. If you become debilitated or disabled, the trust can systematically designate your trustee to manage it and your financial matters without the requirement to acquire durable power of attorney.
Continuous Management
This enables the wealth that you’ve accrued to continue to increase for multiple generations by utilizing a professional trustee for the management of your property. You could restrict the number of withdrawals to just income, with special emergency funds if you desire.
Estate Tax Minimization
Whereas the revocable living trust isn’t a good tax minimization device on its own, funds may be included in the trust document to transfer wealth by setting up a credit shelter trust should you pass away. The credit shelter trust is an amazingly effective device to help decrease estate taxes for larger estates that surpass the collective estate tax exclusion totals.
Establishing the Living Trust
Disadvantages of the Living Trust
Whereas there are a lot of advantages for the establishment a revocable living trust, it also comes with drawbacks:
Cost of Planning
The establishment of a revocable living trust requires significant legal help, which is going to be costly. A commonplace living trust could cost $2,000+, whereas a typical last will and testament may be written up for around $150 or so.
Maintaining Trust Books and Records
After the trust is created, your work is not finished. A lot of individuals need to monitor it annually and make modifications as required (trusts do not adjust systematically to changed situations, like divorce or a child being born). You should think about the added inconvenience of making sure future assets are continually registered in the trust and providing other individuals with accessibility to the trust documentation to examine trustee powers and responsibilities.
Retitling of Property:
After the trust is established, property must be retitled in the trust’s name, involving additional time and, at times, incurring fees for title modifications.
Limited Asset Protection:
Contrary to common belief, revocable living trusts offer minimal asset protection, especially if you retain an ownership interest, such as appointing yourself as the trustee.
Administrative Expenses:
Expect additional professional expenses, including investment advisory and trustee fees, when designating a financial institution or trust company as the trustee.
No Tax Break:
Despite your efforts, a tax benefit is not conferred by your revocable trust. Trust assets continue to accrue taxes on gains and/or income and remain susceptible to creditors and legal actions.
Unanticipated Problems:
Challenges like title insurance issues, Sub-chapter S stock, and foreign real estate can introduce numerous complications. Further issues may arise from inadequate education of one’s spouse about the trust’s condition and purpose.
In Conclusion
Source:
Palmer, B. (2020, October 22). Should you set up a revocable living trust? Retrieved April 14, 2021, from https://www.investopedia.com/articles/pf/06/revocablelivingtrust.asp
