Now that 2010 has arrived, people whose incomes were previously too high to permit them to rollover . . .Read more
What's All the Fuss About Living Trusts?
[This article was originally published on September 13, 2005. The links were updated on June 15, 2018.]
Living trusts are often touted as the solution to everyone's estate planning needs. Although it is true that a living trust has several benefits, it is not the panacea for an allegedly inevitable and costly probate experience, according to Connecticut elder law attorney and ElderLawAnswers member Paul T. Czepiga.
A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a 'trustee,' holds legal title to property for another person, called a 'beneficiary.' A living trust is a written document that a person creates with a lawyer during the individual's lifetime.
'A living trust has very practical applications,' says Czepiga, 'but this does not mean that everyone needs one.' Perhaps the biggest reason people set up such trusts is to avoid probate, but in Czepiga's state of Connecticut and in many other states, the probate process is relatively quick and inexpensive for most estates.
Also, Czepiga stresses that while avoiding probate means that the assets can be transferred immediately after death to the intended beneficiaries, it does not mean that the assets avoid death taxes or that you can avoid probate court fees. Probate courts charge fees based on the size of the taxable estate, not on the size of the probate estate.
'The two strongest arguments for using and funding a living trust,' Czepiga maintains, 'are if you have out-of-state real property or a family that argues.'
For out-of-state real property, a living trust that holds such property will avoid the need to go through that state''s probate procedures and paying a lawyer from that state to handle the probate, usually at considerable cost for just the one asset.
If there is a second marriage or children who do not get along, then a living trust may be best (provided your trustee is faithful to your wishes) because it will be harder for one of the other potential beneficiaries to cause trouble for trouble''s sake if they do not know what the trust contains or says. Unlike a will, a trust is a private document.
'Assuming a harmonious family and a properly thought-out estate plan,' Czepiga concludes, 'there is no reason to fear probate. Probate may even be a beneficial process in that there is an independent and skilled entity, the probate court, overseeing the process to make sure that everything happens as you would like it to.'
For an article by Paul Czepiga on the question of trusts versus probate, as well as a description of the probate process in Connecticut, click here.
Click here to visit attorney Czepiga's website.
For more on trusts, click here.
Created date: 09/13/2005