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On average, I receive a handful of phone calls every week from clients and potential clients who want to know whether they should have a living trust as part of their estate plan. These phone calls are even more prevalent after area residents receive a mass mailing concerning an upcoming estate planning seminar being conducted by an unfamiliar attorney or financial planner to discuss the need for a living trust. Far too often, I even receive these calls after the individual or couple have already executed a living trust package which cost them, in some cases, as much as $3,000.
The sad part about all of this is that in a number of cases, these individuals did not need a living trust-based upon the types of assets they owned and their own personal circumstances. Their estate planning needs could have been satisfied by the execution of simple wills and the titling of their assets in such a way as to avoid probate. After discussing this situation with one such couple recently, they told me, “we just didn’t know any better,” and “we wish that we would have been aware of our other options.” Therefore, this article is my small part in educating our area residents on living trusts.
A “living trust” is a legal document that is similar to a will in that it provides for the administration or distribution of property following one’s death. However, a living trust, if properly funded, can also provide for the management of assets during a lifetime and avoid probate upon death. It is revocable so that its terms can be changed during the creator’s lifetime.
Living trusts can be very useful in many circumstances, including situations involving estate tax savings, blended families, large families, young children, elderly individuals with no family, and spendthrift children. However, there are sometimes less expensive alternatives available, such as joint and survivorship ownership, transfer on death designations, and payable on death designations, which will accomplish an individual’s estate planning goals as well. Before executing a living trust, find out what all of the alternatives are and then make a decision.
Proponents of living trusts say that a properly funded living trust will avoid the hassles of probate and save an enormous amount of money. I have had a number of dealings with probate courts throughout the State of Ohio and have found their supervision in this area of the law to be much needed in a number of situations. Court costs to probate an estate are normally $200-$300.
Having a living trust can save attorney fees. This depends on how the attorney handling the estate charges for services. If the attorney is using the probate court guideline, there may be savings. The guideline is not supposed to be a maximum or minimum that is to be charged. It is only a guideline. If the attorney is charging by the hour, there may be little or no savings. Find out how you will be charged upfront.
Probate can sometimes be a time-consuming process according to proponents of living trusts. This is true if the estate involves beneficiaries that do not get along or if the estate is represented by an attorney who does not administer the estate efficiently. The time frame for administering an estate depends on the individuals involved and the complexity of the assets and issues involved. On average, it takes approximately six months to administer an estate if the estate is not required to file an Ohio estate tax return (assets under $338,333) and between one year and 18 months to administer an estate that must file a Federal estate tax return (There is no Federal estate tax in 2010, but under the current law, there will be a Federal estate tax return required if assets are $1,000,000 in 2011 or thereafter).
Over the past few years, the Ohio Legislature has passed a number of laws making probate much simpler. This trend seems to be continuing with a number of probate reform bills pending each year. The Ohio Legislature recently has passed a law requiring an estate to be completed within six months of opening it if the estate is not required to file an Ohio estate tax return.
Having a living trust does not avoid having to file an estate tax return if the total probate and non-probate assets exceed $338,333. In addition, having a simple revocable living trust will not avoid having to spend all of your assets on nursing home care.
Living trusts can be a very beneficial estate planning tool and a number of my clients execute them. However, before establishing a living trust or any estate planning document, individuals should do the following: Select an attorney whom you trust, who is accountable for his or her actions, and who is knowledgeable in estate planning, estate administration, and asset protection areas and find out about all available alternatives before making a final estate planning decision. Our area has a number of attorneys who are very knowledgeable in these areas.
Living trusts are not for everyone.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
James F. Contini II, Esq.
Certified Specialist in Estate Planning,
Trust & Probate Law by the OSBA
Krugliak, Wilkins, Griffiths & Dougherty Co., LPA
158 North Broadway
New Philadelphia, Ohio 44663
Phone: 330-364-3472
Fax: 330-602-3187
Email: jcontini@www.kwgd.com