Can I Trust My Living Trust?

The short answer is NO. What is commonly referred to as a “living trust” is a revocable trust, meaning the creator of the trust, the settler, can revoke it at any time. Irrevocable trusts certainly can avoid probate, but they also mean a substantial loss of control by the owner of the assets involved, and, for that reason, are not very popular. Revocable living trusts, on the other hand, are frequently part of a “bag of goods” sold to innocent and unsuspecting people, typically seniors, who believe they are “avoiding probate”, saving money, protecting their wealth, while effectively passing their treasure to their beneficiaries. While revocable living trusts can have some application in certain estate plans, they usually do little to assist the client, can often cost far more than a will (some charge as much as $2,000 as opposed to a will which may cost less than half of that), and do virtually nothing to avoid probate costs or succession taxes. You have all seen the glowing advertisements which claim living trusts can do just about everything imaginable, including cleaning the house and fixing the car! They often do not tell you that you will still have to file the trust in the probate court along with the estate tax return which the law requires be filed in the probate court. They also don’t tell you that the probate fees are based on the gross taxable estate as shown on the estate tax return, whether there is a normal probate administration (with or without a will) or one with only a revocable living trust. No probate fees are saved at all!Other false claims belive their pitch. First, the living trust does not protect your assets from claims of creditors. Because it is revocable, the law presumes it is still your asset and so do your creditors. It will not protect your estate from the claims of the state of Connecticut under Medicaid’s Title XIX program, nor will it save you a dime in estate taxes. Whether you use a will or a trust, you have the right to name your own executor (with a will) or trustee (with a living trust). They are both entitled to compensation and there is absolutely no guarantee that an executor will charge any more than a trustee. The best advice is to appoint someone you trust who will not charge a fee at all, or a very modest one at that. There are other, much better ways to preserve your wealth and protect your assets than this. So, if, for example, you are concerned about entering a nursing home, this will do nothing to protect your assets. In addition, probate laws can protect your executor from any personal liability for inadvertently failing to list a creditor of the estate that law does not protect trustees.

Second, living trusts are billed as probate avoidance devices. Let us be forthright, no matter what you do, if you own virtually any assets at your death, you will have some form of probate to go through. But, while the probate court may pass the assets from the deceased to the trust, it may actually deprive the Probate Court of jurisdiction to fully hear and litigate a matter afterwards, which is problematic as the Probate Courts are typically far more user friendly than the Superior Courts.

Last, trusts are typically complicated documents and your beneficiaries, should they have concerns, may not understand how to interpret them and immediately go running to a lawyer. This may end up costing you and your family significantly more money should a dispute arise and, as said above, due to complex jurisdictional issues between the Probate and Superior Courts, may drive your family into the Superior Court where they will likely spend significantly more money in most cases.

There are many more examples of how this type of planning may actually hurt, rather than help, you and your family in your attempt to appropriately protect your estate and seamlessly pass it to the next generation. If, you, your family or friends are interested in planning for their future, please don’t hesitate to contact my office today.