A revocable living trust is a trust that you set up while you are still living and to which you immediately transfer ownership of assets that you plan to pass on to your heirs. You continue to control your assets within the trust and can revoke it or change it at any time.
The chief advantage of living trusts, advise experts, is that after your death the ownership of the trust passes directly to the beneficiaries; it does not have to go through probate. Experts caution, however, that living trusts are not appropriate for everyone. Many states have simplified probate, so a living trust may not save money or time.
Living trusts can range from the simple to the complex. Be wary of the "one-size-fits-all" trusts marketed over the phone, by mail, at the door, or through seminars. Even though you can create your own trust using a self-help book or software, experts recommend that you use an attorney.
A living trust can also provide a way to handle your affairs if you become incapacitated. In this case, your co-trustees or successor trustee can take over management of the trust.
Even if you have a living trust, legal experts point out that you still need a will to take care of assets that aren't in the trust.
Their popularity has given rise to living trust scams and schemes that have defrauded consumers of millions of dollars. Here are some tips to help the wise consumer:
- Each individual situation is different so consult a qualified professional before buying a "one-size-fits-all" or "cookie-cutter" living trust "kit."
- Take all the time you need to understand everything before you buy anything. Get your questions answered to your satisfaction. If you feel pressured, consider choosing another advisor who is more willing to work with you.
- Before buying a kit from a salesperson, call your attorney. Compare prices for preparing a trust to make sure the price is fair.
- Probate costs and attorney fees vary widely from state to state, so be wary if a trust salesperson quotes specific results or cost savings.
- Don't give any personal and financial information to the salesperson to be passed on to a lawyer. Meet with the lawyer personally.
For more details about living trusts, check out these resources.
Living Trusts, a pamphlet developed by the Colorado Bar Association, gives a succinct introduction to revocable living trusts in a Q&A format. The article explains how a living trust is created and "what it may or may not accomplish for you and under what circumstances it may be appropriate."
Living Trust FAQs from Kiplinger.com covers the basics of Living Trusts, their suitability for estate planning, and potential dangers.
Living Trust Offers: How to Make Sure They are Trustworthy from the Federal Trade Commission provides tips for identifying misleading living trust offers.
Living Trusts: Beware of "One-Size-Fits-All" Estate Plans, a Consumer Alert from the Michigan State Attorney General's Department, cautions against living trust kits being marketed across the country, particularly to older Americans and often at exorbitant costs, such as $1995 per trust.
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