Introduction : The owner of Form America LLC, a national company specializing in self proving wills for all 50 states, as well as financial power of attorney documents and advance medical directives, is also Florida state certified and licensed for annuities, whole life insurance, term life insurance, and final expense insurance. As a financial advisor, Form America can make you a living trust if you want one, but in most cases we recommend against them. Most people don’t need them, but attorneys and financial advisors love to recommend them because they’re expensive to create and complicated to maintain.
Living trusts have become a popular tool in estate planning, often touted as a means to avoid probate, minimize taxes, and protect assets. While they can be beneficial for certain individuals with complex financial situations, it is crucial to understand that living trusts are not a one-size-fits-all solution. In fact, for most people, a living trust may be an unnecessary and burdensome addition to their estate planning strategy. In this article, we will explore the reasons why most individuals don’t need a living trust.
Understanding Living Trusts
Before delving into the reasons why a living trust may be unnecessary, let’s briefly explain what a living trust entails. A living trust is a legal document that places your assets into a trust during your lifetime, and you serve as the trustee, retaining control over your assets. Upon your death, the trust’s designated successor trustee assumes control, ensuring the smooth transfer of assets to beneficiaries without the need for probate, assuming you have created it correctly, maintained it diligently, and documented it properly.
1. Simplicity of Estates
The primary factor that determines the necessity of a living trust is the complexity of one’s estate. If your estate is relatively straightforward, with no significant complications or substantial assets, a simple will combined with other essential estate planning documents, such as a durable power of attorney and a healthcare directive, may suffice. Form America creates wills for all 50 states for a flat rate of $249, a fraction of what attorneys charge and self provable for probate in all 50 States. Probate can be a streamlined process for uncomplicated estates, making a living trust unnecessary. If you have the right will, everything does what you want it to do anyway without the extra expense, complication and fees associated with making a living trust. In all states but the District of Columbia, Maryland, Ohio, and Vermont, a person can create a self-proving will, and in most states this is accomplished by attaching two “self-proving” affidavits by witnesses of the will’s signing. In NO states does having a will require you to pay an attorney to make it unless you want to.
2. Cost Considerations
Creating and maintaining a living trust can be considerably more expensive than other estate planning options. Establishing a trust involves legal fees, document preparation, and ongoing administrative costs. Sometimes they’re set up to need ongoing annual maintenance fees from their creators. On the other hand, a well-drafted self proving will can accomplish the same distribution objectives at a fraction of the cost. For individuals with limited assets, the financial burden of a living trust may outweigh its potential benefits. Everyone can and should have a will. Most people don’t need a trust. So why do most estate planning attorneys and financial advisors recommend them? Follow the money, right from your bank account into theirs.
3. Probate Alternatives
One of the primary reasons people consider living trusts is to avoid probate. However, probate may not be as daunting or burdensome as commonly believed, especially in jurisdictions with simplified probate processes. Additionally, several alternatives can help bypass probate, such as joint tenancy, beneficiary designations, and payable-on-death accounts. By utilizing these options strategically, many individuals can achieve their desired estate planning goals without the need for a living trust.
4. Privacy Concerns
Living trusts are private documents that do not become part of the public record upon your passing. This confidentiality aspect can be appealing to some individuals who wish to maintain the privacy of their estate distribution plans. However, it’s important to note that in many cases, the majority of individuals do not have sensitive or confidential information in their estate plans. For such cases, the added privacy provided by a living trust may not outweigh the associated costs and complexities.
5. Limited to Zero Tax Benefits
While living trusts can offer some tax advantages for high-net-worth individuals, most people do not fall into this category. The vast majority of individuals will not experience significant if any estate tax consequences. In such cases, the potential tax benefits of a living trust become negligible, further diminishing its necessity.
As most of you know, Form America refers to material from NOLO regularly (and we’re a NOLO affiliate, but have nothing to sell you in this article other than some free cynical wisdom). Every state has tips and tricks to avoid probate, and our friends at NOLO have created a State-by-State cheat sheet here to the shortcuts. Click on your State to see what your probate shortcuts are. None of them involve creating a Living Trust.
While living trusts can be advantageous for individuals with complex estates, high-value assets, or specific privacy concerns, they are not an essential component of every estate plan although nearly everyone is told they need one. For most individuals, a well-drafted will, combined with other essential estate planning documents, can sufficiently meet their needs without the added expense and complexity of a living trust. It is crucial to consult with an experienced estate planning advisor to assess your individual circumstances and determine the most suitable approach for your estate planning goals.
At the end of the day, if you want a Living Trust, Form America can make you one cheap and legally binding. Do you know why you even need one? We bet you don’t.