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Paul Premack, Express-News Banner

San Antonio Express-News
Copyright 2009, Paul Premack
March 24, 2009

Q&A on Living Trusts, Part 1

Dear Mr. Premack: I am trying to decide how to best set up my estate planning. Our estate has become somewhat smaller due to the financial times, but it is still substantial because we were diversified. Yes, we are in the stock market, but we also have CDs, bonds and some real estate. My wife and I want to take care of each other, pass our property to our children, and avoid estate taxes as far as legally possible. I want to be sure that if I am the first to die, my wife won’t spend the next year in court to clear title into her name. Would a living trust be a good choice for us? – WN

Most often, a living trust is set up to help reach two goals. First, it provides a framework to manage your assets properly if you become disabled. You select a Trustee as legal owner and manager of the assets (often, you select yourself as Trustee so long as you remain healthy). You also specify one or more alternate Trustees in case you should become disabled.

Second, a living trust helps keep your estate out of probate court when you die. In the trust, you name individuals and institutions to receive your estate, just as you would in a Will. When you die, the trust distributes your remaining assets without probate if everything was set up correctly.

Here are some logical questions about living trusts, and answers that can help you decide if the approach is right for you:

Where should I obtain a trust? I’ve seen ads, gotten fliers for seminars, and had salesmen contact me. Beware a trust salesman who hawks trusts and insurance products. First, that person is not licensed to practice law or to dispense valid legal advice. If you give out any information, it is not protected by the attorney-client privilege. Second, that person will not discuss with much enthusiasm alternatives to a trust that might serve you better as he has no legal expertise. Third, that person is very likely using the trust to get a foot in your door so he can market annuities or other insurance products to you.

What is the cost of a living trust compared to a Will and probate? Attorneys each set their own rates, so there is no way to predict exact costs. A trust prepared by a licensed and experienced attorney is likely to be no more expensive than one from an unqualified and unlicensed salesman representing a distant company. On the other hand, a Will is often less expensive up front than a living trust, because a Will does not contain a plan for managing your assets if you become disabled.

The costs of probate vary greatly, depending on many factors. In general, the cost of administering a living trust when one party dies is less than the cost of probate. This is especially true if the trust is prepared for a married couple and is written to avoid probate when each spouse dies. In some situations a trust saves money, in others probate is less expensive. Every situation is different, so you should consult your own attorney.

Do I have to rearrange all my accounts and investments? To gain best advantage from having a living trust, you should fully "fund" the trust. To do so, you contact your financial institutions to re-register your accounts as held by the Trustee of your trust. You re-title your home and cars to the Trustee. That way, if you become ill, your alternate Trustee can take over immediately. When you die, all the assets funded into the trust pass to those you specify in the trust agreement, without going through probate court.

I’ll continue this Q&A about living trusts next Tuesday in this same space.

Prior Column: Trust can Solve Second Family Dilemna
Next Column: Q&A on Living Trusts, Part 2

Disclaimer: This column answers a specific legal question asked by an individual in Texas. The answer may or may not match your individual situation. Be careful not to treat this column as specific legal advice, as it may not meet your individual needs. It may give you a solid basis for discussion with your own attorney.  You should consult with your personal attorney before you take any action on this or any legal issue. Also, please be aware that laws change, so  this column is valid only as of the date it was published. This communication does not create an attorney-client relationship between the author and the reader.


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