Dangers of Living Trusts
A living trust is a trust created during a person's life, rather than one created after the person dies. The creator of the trust is referred to as the "settlor" or "grantor." Setting up a living trust carries a number of advantages, helping you to avoid certain taxes, to keep clear of probate or to help manage a piece of property over many years. Living trusts also carry their share or problems, however, which you should be aware of before you establish one.
Other People Are Reading
-
Changes to the Trust
-
When you wish to make changes to the trust, it isn't just a question of rewriting the terms and being done with it. You need to write up a specific amendment that makes reference to the portions of the trust you need to change. You then need to have it notarized and attached to the original trust for it to be legally binding. In many cases, this requires a lawyer or a legal clerk, which can cost money. If you don't consult one, the changes may be invalid from a legal perspective, negating all of your work.
Planning
-
A living trust requires more effort and cost to initially set up than a will. A living trust also requires periodic updating in order to keep track of new assets brought into the trust over time. This requires significant pre-planning in order to effectively manage the trust over time or money to pay someone to help manage it for you. The early initial set-up costs may make the effort prohibitive or place undue hardships on you financially in the short term.
-
Probate
-
Probate courts serve as an oversight to wills, assuring that the assets specified in a will are distributed legally. A living trust cuts the probate court out of the equation, which actually serves as one of its benefits. Sometimes, however, situations arise making a neutral arbiter desirable; for example, if siblings can't agree on the details and fall to infighting. In such circumstances, the lack of probate oversight becomes actively detrimental.
Misconceptions
-
Some people believe that a living trust will protect the assets in the trust from lawsuits. Unless the trust is an irrevocable trust in which the beneficiary permanently gives up control of the principle and merely receives income generated by the principle, then it may be attached to a lawsuit and you may need to surrender it if the court rules against you.
-
