I picked up a copy of N.F. Dacy’s book “HOW TO AVOID PROBATE”. he writes a pretty damning indictment of the corrupt, expensive probate system of settling estates in the US, He says that by setting up a “living trust”, you can insure that your assets will go to exactly ly who you designate, and your estate can escape lawyesr 9and their fees) entirely.
Is this correct? Is setting up a living trust difficult? And, have the various legal organizations actually tried to stop people from doing this?
Yes, it’s correct. The downside is that you have to put all of your assets in the name of the trust, not in your name. My wife has been on my butt for about three years to set one up for us, and I will be doing it Real Soon Now.
The short answer is “yes.” A properly-established living trust can avoid probate. Setting up a living trust is not particularly difficult. What’s trickier is transferring all of the person’s assets into the trust. For example, bank and brokerage accounts will have to be retitled in the name of the trust, and real estate must be transferred (which will involve a new deed). This is where most people screw up the living trust.
Rather than rehash all the ins and outs here, I’ll just point you to www.nolo.com. Click on the Wills & Estate Planning link, then choose Living Trust. Lots of good info.
There are some catchers to setting up an effective “living trust.”
The obvious one is that to do it right and keep it right can cost a fair amount of money and involve a fair amount of hassle. You have about as much chance of setting up an effective living trust on your own as you do of removing your own appendix. You are going to need help and that help, from lawyers, accountants, investment people, might not come cheap. The principle danger is that the Settler will forget to put everything into the trust. Anything held in the Settler’s individual name at death may have to be administered in probate.
You may be able to avoid probate administration if you convey everything you have and will have in the future to a trustee, but if the assets are substantial, you are not going to avoid Federal Estate Taxes and you are not going to avoid state inheritance taxes in most cases.
What you can do with a living trust is avoid the expense and time involved in probate administration. Of course, when that happens you are dead and the burden of probate is pretty minimal in the case of a person with modest assets and surviving spouse or children.
It’s a little like the pills you see advertised on TV. They will do a swell job on some unidentified affliction but the side effects can be pretty horrendous.
The other time that a living trust can bite you is if the decedent has a lot of debts. If the estate goes through probate, the creditors get their last chance to collect what they’re owed. Once the process is completed, the creditors are cut off - in effect, they can’t come after the heirs for some debt that they, the creditors, failed to lay claim to as part of the probate process. With a living trust, on the other hand, the creditors can come after any of the beneficiaries of the trust to get what’s owed them.
Spavined Gelding is right about probate not being a big deal if the decedent has modest assets, but even then, probate tends to take a long time, whereas the living trust of someone with modest assets can be wrapped up in a few weeks, at most (especially if there’s no real estate involved).
Do be aware that these things vary from state to state. In NJ, with a properly drawn up “self proving” will, probate takes about a half hour, is done in the county clerk’s office and costs relatively little. IANAL, but we went through this rather painless process in settling my late father’s estate about a year and a half ago.
In Virginia, it tends to be more involved. In settling her mother’s $25,000 estate, a neighbor spent several months, with repeated filings with the court required. Not expensive, but certainly a PITA.