While estate planning is very important, it is also very confusing, and living trusts are no exception. Many individuals have misconceptions about this special document. Individuals are often too quick to believe what their neighbors, family, media, friends or anyone else has to say.
So how much does a living trust cost? Well, the answer depends on the specific situation, but here’s a list of the top misconceptions about living trusts in Arizona.
Myth #1: A Living Trust is Expensive
It is true that a well-constructed living trust does have a higher initial cost compared to a will. But this initial cost of the will does not include the costs of probate after death. It also excludes the cost of a conservatorship in the case of incapacitation and the costs of guardianship should assets be left to a minor. When a will and living trust is compared, the living trust will cost much less.
Myth #2: Trusts are for Wealthy People
Trusts have been around for decades, and in the past were frequently used for the rich due to special tax planning. Because of this, many still believe that trusts are only for the wealthy.
Today this is not the case. In fact, recently the benefits of a revocable living trust for small size estate have become more desired. Every estate plan, whether small or large, desires a living trust because of its ability to dodge probate and court conservatorships/guardianships.
When relying on a will, the probate and court conservatorship/guardianship is unavoidable, and more times than not this process takes a higher percentage from smaller estates than larger ones.
This higher percentage is taken from the estates that often times cannot afford it. Besides the cost factor, a living trust will also save loved ones from the hassle of the probate process.
Myth #3: Most Individuals Go Through Probate Anyway
If a living trust is properly prepared and each asset is correctly titled is will completely dodge the probate process. This rumor is true only when individuals fail to properly complete their living trust.
There are only three ways that a living trust and the assets would go through probate.
- All the assets were not transferred into the living trust.
- The trust was not properly written (it is recommended to hire an experienced attorney who will ensure it is correctly written).
- A revocable living trust was not filed; a trust that is part of a will does not work as a living trust and will not avoid the probate process. This trust only goes into effect after the will goes through probate.
Myth #4: Individuals Must Give Up Control of their Assets
Most individuals choose to be their own trustee; in this case they can do anything they desire with their assets prior to death. If they wish they can buy or sell assets, change the trust, or even cancel the trust.
In the cases where a third party trustee is named, the owner of the trust (and the beneficiaries after the owner dies) can replace the trustee at any time.
A trustee does not “own” the assets, in fact they are required to follow the instructions precisely and are held legally liable. The owner decides everything, from when loved ones will receive assets to when the trustee will make periodic disbursements. The entire time the assets remain in the owner’s name and are protected from creditors, divorcées, and irresponsible spending.
A living trust allows the owner to have full control over their assets their entire life and even when they become incapacitated or after death.
Myth #5: There are Always Trustee Fees
Most individuals choose to be their own trustee; in this case there are no management fees. Should a successor trustee be put in place, they are entitled to receive a fee. Most often the individual named is a family member, and they usually choose not to take the fee.
Should a professional trustee be named, they will take a small fee but only once they start to act for the individual. These trustees do a hefty amount of work for a small percentage and most individuals find the fee to be very reasonable.
Myth #6: Trusts Require a Separate Tax ID Number
While still living, the individual will continue to file taxes with their social security number. The IRS views a living trust to be a non-event since it can be cancelled at any time. Once the trust continues after death, then will it need a separate tax ID number and tax return.
Lowering Your Costs for a Living Trust in Arizona
Creating a solid and sound estate plan will save you and you loved ones time and money. If you would like to get your estate plan in order, don’t go into the confusing process alone. Hire an experienced estate planning attorney to make sure each document is properly completed.
The experienced estate planning team at JacksonWhite is ready to help and can offer the advice you need. Attorney Dave Weed has successfully helped many design estate plans to protect their assets and create a powerful financial plan for their families.
To learn more about how we can help you, call us at (480) 426-8359 for your free consultation.