As we’ve often discussed here on the blog, having a well-designed estate plan – no matter the value of your property and assets – is a gift to your family and/or friends who will handle your affairs once you’re no longer living. And there are a lot of things to consider when working through the planning process.
From creating your will to ensuring that someone you trust is designated to make decisions for you via power of attorney should you become seriously ill or incapacitated, there is much to know and understand – especially if minimizing complications for your loved ones is your priority.
One component of estate planning that may fall under creating more complications for executors and heirs is the living trust. While these asset-protective arrangements have great value in some specific circumstances, unfortunately, living trusts are often sold to people who do not actually need them, and the truth is that they don’t tend to make sense for the average individual or estate plan.
Probate isn’t something to be afraid of
Many people who erroneously believe they need a living trust as part of their estate plan do so because they misunderstand – and fear – probate as an expensive and time-consuming process that they need to protect their friends and family members from having to deal with.
While probate can undoubtedly turn into a nightmare, most smaller estates (defined in Pennsylvania as those with assets totaling less than $50,000, which does not include real estate values, non-probate assets, and money used to pay for funeral expenses) can utilize a simplified, “out of court” process that doesn’t take much time to work through at all.
In short, the average estate simply doesn’t require the level of complexity that living trusts add because it doesn’t include enough assets to qualify it for formal probate. Additionally, if your estate was carefully planned, even if it is larger, formal probate will still likely be quite straightforward.
Living trusts can add unnecessary expense and roadblocks
As we talked about in a previous blog post, there are quite a few pitfalls that can derail your estate plan. While we didn’t touch on living trusts specifically in that post, they can easily create beneficiary designation issues within your estate plan. And those issues can require legal action (which equals added expense for your family members, friends, and/or heirs) to untangle.
The example cited in the Kiplinger’s article we linked above illustrates a trustee problem that’s not unlikely – especially if you take a “set it and forget it” attitude toward your estate plan in the years after it was initially created.
When you set up your living trust, say that you name yourself as trustee and your spouse as the joint or successor trustee. If both you and your spouse become incapacitated, and you did not appoint another successor (such as an adult child), your family may face a legal challenge in order to secure access to your finances.
Additionally, living trusts can cause problems with qualifying for Medicaid and other government benefits, as assets in the trust may be counted by specific agencies considering your eligibility.
When does a living trust make sense?
Do any of the following situations apply to you? If so, setting up a living trust may actually make smart financial sense for you and your family. However, we cannot stress enough the importance of consulting with an estate planning professional, like our attorneys here at May, May & Zimmerman, to help you weigh whether creating a trust is right for your unique situation.
1. You own property in a different state
If you own a vacation home at the shore or investment property in a state other than Pennsylvania, that asset would likely need to go through probate in that locality unless it is in a trust.
2. You want to favor one heir over others
While there are other ways to accomplish this, establishing a living trust to set aside more for one child than another can be a good solution. Trusts are more difficult to contest than directives spelled out in your will.
3. If you want to benefit a charity and receive income and/or tax benefits during your life
Once again, while there are other ways to accomplish charitable giving goals in your estate plan, establishing a charitable trust or charitable remainder trust may offer additional financial advantages while you’re still living.
We’re here to help…
If you are thinking about your estate and have yet to consult with an experienced probate and estates attorney for guidance, we certainly recommend that you consider it. High-quality legal advice during the estate planning process can save money and heartache for those you want to benefit from your legacy.
Here in Lancaster County, May, May & Zimmerman has been the choice of families seeking strong estate planning guidance for generations. We look forward to working diligently for you and your loved ones, too. Get started with a free phone consultation today.
This blog is being published for educational purposes only as well as to provide general information and a basic understanding of the law, not to provide specific legal advice. By entering this site you understand that there is no attorney client relationship between you and the publisher. This site should never be used as a substitute for competent legal advice from a licensed professional attorney in your state.