In many instances living trusts are very beneficial tool in estate planning. Though recently, living trust sales have become a disturbing area of consumer fraud in Texas. Each year thousands of consumers waste from $500 to $5,000 by purchasing living trusts. Con artists promote their business by making false or misleading statements about the probate process, guardianships and the taxation of estates. Here are a few examples of misleading statements to watch for:
Living trusts save taxes. At best this statement is misleading. A will accomplishes exactly the same tax savings at a much cheaper cost. Further, most Texans will face no tax at all. Every person can have an estate of $5,000,000 without paying tax. Note, however, that this amount is currently scheduled to fall to $1,000,000 in 2013 unless Congress acts before then.
Living trusts save attorney fees. This statement is generally false. Living trusts generally cost more to implement and administer than will based estate plans because you must administer and transfer assets twice with a living trust rather than once with a will. When you set up the trust you must transfer assets into the name of the trustee. When you die, the trustee transfers the assets to your heirs. With a will, your assets are transferred only once – at your death.
Some con artists also scare consumers by saying that attorneys charge from 3% to 10% of your estate to probate your will. In fact, most attorneys charge an hourly rate for this work. If you are quoted a percentage fee, seek another lawyer.
Probate takes years and ties up property. This statement is misleading at best. Nontaxable Texas estates can be generally be probated in a few months and the person appointed executor under a probated will gets access to the decedent’s property immediately upon appointment.
Living trusts are appropriate in many instances. For example, a person who owns property in several states can avoid multiple probates in all those states by transferring the properties into a living trust. Probate can be burdensome and expensive in some states other than Texas. In those states, living trusts can save time and money. If you have questions about creating a living will or an estate plan contact Branscomb Law estate planning and probate lawyer, Scott Sherman.