You may have heard that living trusts are a good strategy for avoiding probate, since they allow you to pass property directly to a named beneficiary. This means they can potentially save your loved ones from a months-long legal process involving expensive legal fees. Living trusts are an attractive option for many property owners for these reasons, but there are a few things you should know before getting started. Here are some basic facts about living trusts to help you determine whether one is right for you.
Not All Assets Should Be Placed in the Trust
Some assets such as pay-on-death bank accounts, joint bank accounts, and life insurance policies pass directly to the named beneficiary without having to go through probate, although some people find it easier to name a trust as the beneficiary. This is sometimes the case if the beneficiary is underage and a guardian must be appointed. If you have questions about what to include when creating a trust, contact an estate planning lawyer to help.
A Trust Cannot Replace a Will
Even if the majority of the grantor’s assets are going into a living trust, it is still necessary to create a will that makes the person’s wishes known. In addition to clarifying the deceased person’s requests regarding property distribution and other matters, a will also simplifies the handling of the estate. For example, in some states an estate under probate with a last will and testament is obligated to respond to creditors only during a limited time, for instance a probate period of three months, while an estate with no will can be contacted by creditors demanding assets for up to two years.
Trustee Fees Are Lower Than Executor Fees
In general, family members who act as executors or trustees accept only a nominal fee or none at all. However, if a professional such as a probate attorney is acting in this capacity, there are often substantial fees involved. A typical state fee schedule might designate 5% of the first $100,000 for the estate’s executor, with a gradually descending percentage as the value of the estate increases. Typically, trustee fees are much lower, usually around 1%. The cost of handling any estate depends on its value and complexity, so ask an experienced probate lawyer if you have questions about legal fees.
Property Placed in Trust Can Still Be Taxed
Even though the process of passing property along is much simpler with a living trust, those assets are still subject to various taxes at the time of death. Real and tangible property such as houses and real estate will be taxed based on the state in which they are located, regardless of where the owner lived. Other property such as stocks and bank accounts, which are known as intangible assets, are taxed based on the rules of the state where the decedent lived.
For help setting up a living trust or will, call the offices of Queens probate lawyer Richard Cary Spivack and secure your family’s future with confidence.