Consumer Alert - Revocable Living Trusts: Magic or Myth?
Out-of-town non-attorneys are coming to our area, encouraging people to attend a “living trust” seminar. These living trusts often do not “live up” to their hype.
Instead of buying a “living trust” from an out of town salesperson, consult a local attorney knowledgeable on trusts to guide you.
To help you make an informed decision about trusts, we have debunked the following claims often made by non-attorney living trust salespeople. A non-attorney encouraging people to establish a trust may be committing the unauthorized practice of law, which is a criminal offense.
|Merely establishing a living trust does not avoid probate. To avoid probate, you must go through a lengthy and often complicated “funding process” after setting up your trust. The living trust salesperson may disappear after the initial sale.
|Probate is expensive
|Probating a will often costs between $200 and $400. An experienced local attorney can guide you on whether to avoid probate, and whether a trust is appropriate for your situation.
|Reduce or Avoid Death Taxes
|Revocable living trusts do not help you avoid Pennsylvania Inheritance Tax if you retain certain rights to your property. Most people’s estates are not subject to federal estate tax, regardless of whether they have a living trust.
|Protect assets from long term care or creditors
|Revocable living trusts do not protect your assets from long-term care or your creditors, when you retain complete control of your assets.
|Manage assets when you are incapable
|Catastrophic medical events are frightening. Most people want someone to manage their assets in this situation. A trust only offers a partial solution. You should consult with a local attorney to make sure you are covered.
|Allow assets to be distributed to your family immediately after death
|A trustee, much like an executor, may be held personally liable if assets are not distributed properly.
|Although a living trust will not be probated, the trustee is required to file a Pennsylvania Inheritance Tax Return. The trust may become a public record anyway.
|Save legal fees
|Substantial fees are being charged to establish living trusts. The commissions charged by advisors establishing the living trusts can exceed the fees charged by attorneys to administer an estate.