To Trust or Not to Trust? – HRMM&L In Brief article January 2013 issue

January 1, 2013

by Susan Piette

In discussing estate planning with my clients, I am regularly asked about living trusts or more precisely, “revocable living trusts.” Although many people have heard of these terms, they readily admit they really don’t understand the marketing information that they have either received in the mail, heard on the radio or at an event where such trusts were discussed. I have had clients come to see me with their three inch binder in hand, declaring the contents as their living trust, only to confess that they are not really sure why they had the living trust prepared or what is actually in the documents in the binder. Generally, they express that the trust was promoted as a way to avoid taxes on their estate after they died.

So, to trust or not to trust — why would someone want a revocable living trust? Before answering that question, let’s define what a revocable living trust is.

A revocable living trust is a written agreement designating someone to be responsible for managing your property. It’s called a “living trust” because it’s established while you’re alive. It’s “revocable” because, as long as you’re mentally competent, you can change or dissolve the trust at any time at your own discretion for any reason. You, as “grantor” of the trust (the creator of the trust) retain the right to withdraw whatever you want from the trust at any time. Typically, a living trust becomes irrevocable (cannot be changed) when you die and the assets in the trust are distributed pursuant to the terms of trust instrument.

At HRMM&L, we discuss with our clients their needs and objectives for their estate planning and then assist them by formulating a plan which is individualized for each client. For simple estate plans, we have a set fee schedule which includes the initial meeting, drafting of estate planning documents (generally including wills, durable powers of attorney and medical powers of attorney/ advance healthcare directive), review of drafts with client (and modification if needed), execution of the documents and storage if desired in the firm’s vault to avoid damage or loss. The same services are provided for more complex estate plans on an hourly fee basis.

Clients will incur costs for both the administration of an estate with a traditional will and the administration of a living trust. These costs would include the expenses of legal advice and services for estate/trust administration, document interpretation, proper payment of taxes, creditors, distribution to beneficiaries, and other related issues.

If one elects a revocable living trust, you will not only need to incur the costs of the preparation of trust documents but also all related documents to retitle all assets during one’s life into the trust. “Retitle” means to change the name on your assets. Real estate needs a new deed, checking accounts need new checks, stock certificates have to be mailed to the issuer with a request to issue new ones, CD’s need to be changed by the bank, etc. All new purchases need to be titled in the name of the trust. Often, people do not transfer all assets or some assets, such as tangible property, cannot be titled and therefore cannot be transferred into the living trust.

Revocable living trusts are appropriate for some people in some circumstances, but are often not needed or preferable for most people in Pennsylvania. Almost all people who have a trust should also have a will if they want to direct the inheritance of their assets that cannot be, or by error are not placed, in the living trust.

We all need the facts about asset protection and estate planning. We also want the peace of mind of knowing how our assets will be distributed upon our passing. You are the only one who can make important decisions about your estate planning. You need clear and knowledgeable information to make those decisions. If you have questions about estate/trust planning and administration, our attorneys in the Estates & Trust Department of HRMM&L will listen to you and assist, review and tailor your estate planning to meet your needs and objectives.

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