Estate planning help needed.

September 14, 2008 11:42 AM

Are there any downsides to having a "living trust" as part of my estate plan?

I'm want to make an estate plan including my last will and testament, living trust, health care proxy and power of attorney.
Legalzoom.com will do this for a few hundred dollars. A bricks and mortar lawyer quoted me a price of 2 THOUSAND dollars! I have no children and will be leaving everything I own to my girlfriend.
All I've read about living trusts says that this is the way to go in addition to last will and testament, living trust, health care proxy and power of attorney.
Can legalzoom.com handle my simple needs at a low price?

posted by boby to work & money (8 comments total)

IANAL, but I used to sell estate planning services for a fairly sleezy outfit. Federal law allows the first $3 million ( I think that is the current amount) to pass to your heirs tax free. That number drops to $1 million in 2011 if Congress doesn't reauthorize it. As you are single person with no kids, I can't think of any reason why you would need a trust unless you are seriously threatening those upper limits. The health care proxy and heathcare power of attorney are standard forms in many states that you can probably get from a hospital web site for free. Trusts are used for a couple of reasons, primarily to ensure ongoing financial support for dependents, to avoid estate taxes, and to pad the commission checks of people who sell these services.

You can spend $99 on Wills software and crank out a perfectly valid will and associated heathcare related forms in about an hour. For a simple situation (as your sounds) it's not rocket science.
posted by COD at 12:53 PM on September 14, 2008 [1 favorite]

With things like this the devil in is the details. If you're asking this question you clearly don't know enough to think about the details. Living trusts eventually become irrevocable and if there are questions or disagreements about executors or interpretations the assets can be tied up for years, often under the control of an executor not of your choice.

I saw one trust get churned down to 15% of its initial value over 3 years by a series of high-commission stock trades undertaken by the court-appointed executor (an employee of the bank that held the assets), while the 3 siblings it was ostensibly intended for squabbled over how to divide it up. That was a big lose for everyone involved and never what the decedent intended and it was because there was some uncertainty in the way the determination of executor was worded.

You can get a custom job from a lawyer, written for your situation, and hope he's smart enough to take everything into account, or you can get an off-the-shelf job where it's pretty much guaranteed to not be a good fit.
posted by ikkyu2 at 12:57 PM on September 14, 2008

There are a series of pluses and minuses for wills and for trusts, and the right choice means assessing those and balancing them. It is best done with the advice of a licensed professional. That is why LegalZoom is not a good idea. It can produce the documents you want, but it cannot and will not advise you of the costs and benefits.

You can seek out a lawyer's advice and it may cost you nothing (a free initial consultation) or maybe a hundred dollars or two. Then you can decide from there.

One significant downside of a trust is that the upfront costs are higher. A will will perhaps cost you $200 to $500 or so, compared to the cost you were quoted. But a trust keeps most things (not all things, but most things) out of the probate court, and thus saves money later.

Seek out competent legal advice.
posted by megatherium at 5:05 PM on September 14, 2008

Do you care what your girl friend does with the money once it is all hers?
IANAL but where I have seen the biggest advantage of the living trust is that when you die, you put the maximum tax free in a trust for your children and other heirs with your spouse having the right to draw on it for living expenses and then the remainder goes to spouse and gets passed on according the to spouse's will. Without a trust, in that situation, the alternative is everything goes to spouse (tax free) and then goes to mutual children when spouse dies, but everything above the spouse's tax free amount get hits hard and meanwhile, you didn't use any of your right to pass things to non-spouse heirs tax free. Obviously, in your case, you don't get the advantage of the spouse being able to inheirt tax-free, so that rules out one advantage.

The second advantage is that the terms of the trust become fixed when you die, so you may want your girl friend to be able to draw certain amounts (say earnings) during her life but after she dies, the remainder is distributed according to your trust, not her will.

If you have a living trust then you have to retitle your assets in the name of the trust (a mild headache)but there is no point to the legal paperwork unless you do the transfer. i've heard that it is easier to take care than probating a will but I'm not sure if it is really worth the trouble just for that. (Did I say, IANAL?)
posted by metahawk at 5:07 PM on September 14, 2008

Ask yourself if this is something you want have done right or not. If you want it done right, get a lawyer. This isn't about the 2G's--its about how much of a fucking headache this is going to be for those you love if you die. You are doing it for them. The cost of doing this wrong is very high.

I am not your lawyer.
posted by Ironmouth at 7:04 PM on September 14, 2008 [1 favorite]

The trusts metahawk and CAD are referring to are not Living Trusts. They're (most likely) income bypass trusts.

A living trust saves you ZERO taxes. It does save your estate/heirs probate costs (you can look those up for your state), time (a year isn't abnormal), and hassle of probate court. They also are much less likely to be challenged. If you're looking at a trust in order to save your estate taxes, that's a whole nother ball of wax.

I don't know where you live, but in the SF Bay Area a decent package deal (meaning will, durable powers of medical/financial attorney, living trust) runs about $1800, unless your situation is complicated.

I've seen some decent, simple will software, but I'd be wary of a living trust out of a box.

The question comes down to: how serious are you about your heirs getting the money? Some people don't care; the estate can pay the fees and the heirs can go through the hassle if they want the money so damn bad. There's no right answer.
posted by small_ruminant at 9:44 PM on September 14, 2008

As I understand it, a living trust can be spent however you want, changed however you want (and has no tax advatnages) until you die. The minute you die, the trust coverts to whatever terms you set up. From what small-ruminant says, it sounds like the advantages just in terms of distributing your estate are probably enough to make it worth while. However, once you have gone to the trouble of doing a trust, there are a range of bells and whistles (such as the tax advantages I described before or if you don't want the person receiving the money to have complete control) but I'm sure it is simpler and cheaper if you don't need those features.
posted by metahawk at 11:17 PM on September 14, 2008

I'm 50 years old and in good health. The living trust can wait till later.
Thanks for all the opinions! For now I think I'll go with a simple will, health care proxy and power of attorney.
posted by boby at 3:05 AM on September 16, 2008