Do You Need a Living Trust?

by Roger Ellison, CFP

Many people use living trusts as a substitute for wills. They are also known as inter-vivos trusts, Loving Trusts, or revocable living trusts (RLTs). Regardless of what they are called, if properly drafted by a competent attorney, properly executed and properly funded, a living trust can be an effective estate planning tool in some circumstances. Please remember also that living trusts are often used quite appropriately for purposes other than planning an estate.

The problem, however, is that all too often the advantages of living trusts as an estate planning tool are exaggerated or misstated, and the trusts themselves are not properly drafted, executed or funded. “Avoid the horrors of probate” and “save death taxes” are two of the more common reasons directed at the elderly or unaware for using a living trust rather than a will. Unfortunately, these reasons may not be good reasons. Probate is generally relatively simple and affordable in Texas and in many ways is not all that different from settling an estate with powers granted by a living trust. Living trusts themselves do not save death taxes any more or less than a will properly written to the particular circumstances.

The most important thing a person should do when considering a living trust is to consult an objective trusted advisor and/or attorney. A door-to-door salesman or a telemarketer is not the person to consult. Be cautious of seminars and magazine or newspaper ads by unknown companies. Unfortunately, many elderly and unaware persons have fallen victim to their preying and the results have been unfortunate and costly.

Another important determination is to consider, with that trusted advisor, whether or not a living trust should be part of the estate plan. If an estate will own property out of the state or the country, if a person requires a high degree of privacy to or independent management of their or heirs business affairs, or if an estate squabble or fight is anticipated, a living trust might be appropriate. (A will, however, can easily address some of these same issues.) A living trust probably should not be considered to avoid death taxes, to avoid probate, or if the estate will have assets of $1,500,000 or less.

The bottom-line is that living trusts have their place in estate planning, but only if the situation merits. Too often the match is not a good one, and purchasers are not served well. See an objective trusted advisor or attorney. Certainly life’s accumulations and wishes for loved ones merit that effort and good care.

Roger Ellison, Vice President of Planned Giving, at the West Texas Rehabilitation Center Foundation, is a Certified Financial Planner who provides gift and estate planning services on a no cost, no obligation basis. He may be reached at 325-223-6309 or roger@rogerellison.com