Living Trusts are a Growing Area of Consumer Fraud.
The Idaho State Bar has put out a publication about Living Trusts that is very informative, called “Do You Really Need a Living Trust?” This Senior Tip comes from that publication.
It states that every year Idahoans lose thousands of dollars through the purchase of unnecessary trusts. Often families face greater costs dealing with problems caused by the trusts. There are some situations when a living trust is appropriate, but often people could achieve their purposes by far less expensive means.
Following are some myths and misleading statements about Living Trusts:
- Your estate can be destroyed by the death tax: This is misleading because in 2016, the federal estate tax only affects estates of more than 5.43 million in value.
- Living Trusts save taxes: A revocable living trust saves no more estate taxes than a properly drafted will.
- Living Trusts help you avoid contested wills: Living Trusts are contested on the same grounds that wills are contested.
- Living Trusts help you avoid creditors: During your lifetime andafter your death, your assets are subject to the claims of creditors.
- Assets in a Living Trust don’t count for Medicaid Eligibility: Only assets in certain irrevocable trusts may be excluded in determining Medicaid eligibility 60 months (5 years) after the assets are transferred to the trust. Having your home in a revocable trust makes a Medicaid application more problematic.
- Living Trusts avoid the expense of a Conservatorship: It can only avoid the cost in some circumstances.
- Attorneys charge from 3% to 10% or more to probate your estate: Attorney’s fees will be an agreed upon amount, usually based on an hourly charge.
- Probate takes years to complete: In Idaho, in most cases the administration of a living trust is no more expeditious than the administration of a will in probate.
- Probate requires court hearings: Idaho provides a simplified probate process, which involves no court hearing and may not require the filing of an inventory.
- Everyone should have a Living Trust: The costs of creating and maintaining living trusts outweigh the benefits for many Idahoans.
If your goal is to avoid probate, there are several other ways to do so besides having a trust: Pay on Death (POD) accounts, Transfer on Death (TOD) designations of securities and joint tenancy on real property are inexpensive ways of avoiding probate.
If you are considering a Revocable Living trust, you should consult an attorney who is not promoting and selling Living Trusts when making your decision.
Tom Packer is an Elder Law Attorney serving all of Southeast Idaho. As part of his law practice, Tom offers Life Care Planning to deal with the challenges created by long-term illness, disability and incapacity. If you have a question about a Senior’s legal, financial or healthcare needs, please call us.