Don't Trust Living Trusts
Scam artists prey on the fears of seniors, promising that living trusts save money, time and aggravation for themselves and their loved ones. In most cases, these claims are patently false. Keep reading to learn what a living trust is, the reasons to avoid it, and how to recognize the slick scam artists who make unrealistic promises to cheat you out of your hard-earned money.
What is a Living Trust?
A living trust is a legal entity to which your assets (real property, bank accounts, etc.) are transferred. The transfer process is known as “funding” the trust. Unlike a will, this takes effect while you are still alive. As the person creating the trust, you are called the creator, grantor, or settlor. The trust document directs how the assets will be handled. The person in charge of overseeing the trust and making sure the property is managed or distributed according to your wishes is called the trustee.
Most often, you would make yourself the initial trustee while you are still alive and mentally competent. If you then become disabled or die, the control would go to the person named as the successor trustee.
While a living trust may be useful if you need help managing assets during a disability and a power of attorney is insufficient (which is rarely the case), if you have children or grandchildren with special needs (in which case you should consider a Special Needs Trust), or you own real estate in multiple states, the costs associated with the living trust usually far outweigh the benefits. Also, the AARP's research shows that, due to slick marketing schemes, the sales of living trusts are growing fastest among the population that needs them the least!
Remember, an experienced estate lawyer is best qualified to help you determine what form of estate planning best suits your needs.
Why Avoid Living Trusts?
Living trusts can be very expensive, usually far outstripping the costs of wills. A Simple Will, in particular, is quite affordable and all that most people need.
While it is true that using a living trust avoids probate, despite claims to the contrary, probate is often a relatively inexpensive process. Click here to see the Fee Schedule from the Register of Wills in Delaware County, Pennsylvania.
Beneficiaries have no legal right to notice of the estate as they would if there was a will.
Trustees may find themselves subject to personal liability even after funds are distributed if they opt not to follow the procedures used by executors of wills to conclude administration of an estate.
Revocable trusts are subject to death taxes, and irrevocable trusts may also to subject to inheritance taxes. Irrevocable trusts are subject to federal estate taxes, as well.
The IRS defines the trust itself as a separate tax paying entity, complete with its own taxpayer identification number.
All income and capital gains of the trust need to be filed with the IRS through a Form 1041, and the incremental tax rates are higher than those for the income of most individuals.
Trust assets may interfere with an individual's eligibility for Medicaid.
The required supervision and accounting by the court can cost much in terms of financial and time resources.
How to Recognize a Living Trust Scam
Be suspicious of:
Door to door or telephone solicitations;
Anyone who is giving you a “hard sell” or insisting that living trusts are best for everyone;
Offers to explain the benefits of living trusts during a free lunch seminar; and,
One-size-fits-all living will kits – estate planning needs vary highly from individual to individual, and the these packages are seldom even prepared by an attorney.
Estate Planning is too important for yourself and your loved ones to let anyone other than an experienced Estate Attorney handle your affairs. To arrange a free consultation with Gary Stewart Seflin, Esquire, call 610-892-9700 or fill out our Contact Form here.