Negatives of Living Trusts
A living trust, also called a revocable trust or inter-vivos trust, is a kind of legal device which people use to transfer assets before death. Each state has its own laws governing living trusts, and while most people will never use them, there are negative aspects to consider before you establish a living trust. Talk to an estate planning attorney for legal advice about living trusts.
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Probate
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A trust is a legal entity that must be created in accordance with the laws of your state. Typically, a person creates a living trust and names himself as trustee. This gives ownership of property to the trust yet still allows the person the right to use and control the property. People traditionally create living trusts to avoid a complicated probate process after they die, but this concern is often overblown. Probate processes are generally not as bad as people believe them to be.
Property Transfer
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Property must be transferred to a trust in order for you to gain the benefits of its use. This process, known as funding the trust, requires you to transfer legal title of any property to the trust. The whole purpose of the trust is to have your property avoid the probate process, and failing to properly transfer property is a problem. Transferring property often involves, for example, retitling cars, deeding real estate or other labor- or procedure-intensive procedures.
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Cost
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While there is no requirement that you use an attorney, accountant or other professional to aid you in creating a living trust, most people do seek assistance navigating the complicated waters of trust and associated tax laws. These services do not come cheaply, and unless you have a significant amount of property to protect, paying an attorney or other professional to establish a trust may not be cost-effective.
Costs and Taxation
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Whether a living trust will be of any use to you depends largely on your particular circumstances. For most people, the probate process and the costs associated are not overly expensive or complicated, especially with small estates. Also, living trusts receive no special tax benefits over a properly drafted last will and testament, and most people have no need to protect their assets with a living trust.
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References
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