Should You Attend a Seminar and Purchase a Living Trust?
What is a LIving Trust?
A living trust, basically speaking, is a document that a person creates during his or her lifetime that spells out the person's desires for his or her assets, dependents, and heirs.
In a living trust, first there is the grantor. This is the owner of the property (money, land, materials, etc.) who outlines his desires in the trust. Then, there is the trustee. This person, designated by the grantor, manages the trust according to the terms and conditions outlined within. Finally, there is the beneficiary, or beneficiaries. This is the person or people who receive the benefits outlined in the trust.
The basic difference between a will and living trust is that a will does not go into effect until the grantor (called a testator in a will) dies, but the stipulations in a living trust can go into affect immediately.
What About Those Seminars I've Been Invited To Attend?
There are several companies out there that sell "living trusts." As much as I can surmise, they all pretty much give the same reasons to convince someone to purchase one of these cookie-cutter revocable trusts prepared by, presumably, an attorney. While I would not go so far as to call these documents "scams," I do think their sales pitch is seriously lacking disclosure.
Some Things To Consider First
- Before you pay somewhere in the range of $2,500 to $5,000 for one of these blanket trust forms, price out some local attorneys. You likely will be able to negotiate either the same or a better price for personalized attention to your estate planning needs. A "living trust" may be a very bad idea, but if you really want one, a personalized trust prepared by someone in your jurisdiction is far superior to a form filled out by a high-pressure salesperson at a seminar.
- Do not buy anything else these companies may try to sell you. The company may be using the "living trust" to lure you into buying other toxic items.
- You do not need a trust to designate beneficiaries of property on your death. Designations for certain items of property have been done through wills for a very long time. Having a trust do it instead of a will, WILL NOT provide you any extra protection--despite claims to the contrary.
- A living trust will not necessarily protect your beneficiaries from taxes. Section 61 of the federal tax code says that "gross income" means all income from whatever source derived"; this includes "[i]ncome from an interest in an estate or trust." I.R.C. s. 61(a)(15) (2009). When you put property into a trust, it may pass to your intended beneficiaries as taxable income, even if you avoid estate taxes. If you want to avoid taxes and probate altogether, talk to an attorney to help you manage your assets before you die.
- You do not need a "living trust" to avoid the hassles of probate. In North Carolina, a will can be prepared such that your executor may have to appear in court in a limited fashion, but will otherwise not be subject to constant court supervision. Other states likely have a similar provision in their general statutes. Talk to an attorney.
- A "living trust" is absolutely not exempt from being challenged after death; anybody can sue anyone over anything . . . pretty much. The same rules of capacity, undue influence, fraud, etc. apply to trusts as in wills, and living trusts have been voided on challenges after death on these theories. Also, the same types of provisions discouraging beneficiaries from challenging a trust can also be put into a will, and those same provisions will be subject to state law as to their enforceability. A trust will give you NO extra advantage in staving off those blood thirsty, ruthless, money-mongering relatives that you wish to exclude from gaining your assets on death.