Many people see or hear advertisements about having a revocable living trust prepared so they can avoid probate at their death. While such a trust may be beneficial for some, it is not necessary for everyone.
A basic living trust is set up as follows: you execute a document, called a trust agreement, which creates the trust. The trust agreement names you as the trustee and the primary beneficiary of the trust. You then title your assets to the trust, so that when you die, you own nothing that is subject to the probate process. As beneficiary, you are entitled to distributions of trust assets whenever you want them during your life, which does not make any radical changes in your life with respect to access to your assets.
Having your lawyer draw up a trust is typically more expensive than drafting a will. Before you decide to have a trust created, there are some things you should know.
In Nebraska, the probate process can be fairly quick and inexpensive. This of course depends on the size and complexity of your estate. Nebraska has what is known as an “informal probate” process, which is pretty simple for less complex estates. Informal probate does not require any court appearances (assuming the estate is uncontested) and the administration can be completed in as little as three months.
A common myth about trusts is that people can transfer their assets to a trust and completely avoid taxes. Some federal estate tax can be saved for larger estates by using a trust, but income taxes and Nebraska’s inheritance tax cannot be avoided with a trust. In addition, a living trust must be properly maintained for the rest of your life. You must always remember that you have a living trust and that all of your assets should be owned by the trust, rather than by you personally. If you purchase property, you must purchase it in the name of the trust. If you inherit property, you must transfer it to the trust as well. When you open a bank account, you must identify the trust’s existence to the bank and make sure the trust is the owner of the account. Why is all this necessary? Because the benefits of a living trust (such as disability planning or probate avoidance) apply only to the assets in the trust. For example, if just one bank account is in your name alone instead of in the trust, then your estate will have to go through probate and incur the costs of probate, in addition to what you have paid to have a living trust.
Our law firm has never steered clients to create a trust when it isn’t necessary solely to generate extra legal fees. We discuss with our clients what their assets are and what their goals are to transfer their assets at death. Many times a basic will is sufficient and more economical for the client.