Living Trust are great tools that are used by many Americans to solve a range of problems from probate, guardianship, divorce, lawsuits and gold diggers. Yet, a Las Vegas Living Trust attorney may not tell you that many Living Trusts may cause more expense and headaches than probate if they are not used properly.
Problem 1: Wrong State Forum
When folks move from one state to another, they often forget to update their trust and associated documents such as the power of attorney and living wills. This can cause unexpected results. The attorney drafting your trust was using that state’s laws to ensure that your wishes were honored. Trusts are governed by state law, and each state has different statutes, judicial holdings and tax regulations that often will be different when you move.
Problem 2: Unfunded Living Trust
Many trusts, whether from a document preparation company or a law firm, will not avoid probate because the client did not transfer all their probate-able assets to the Living Trust. As a result, the client paid for a Living Trust and the family will pay for a probate. Probate-able assets include you home, bank accounts, investment accounts, LLCs, corporations, and retirement plans without beneficiaries.
Problem 3: Using the Two-Doctor Standard
For years a Living Trust attorney added a provision in the trusts to remove you as trustee of your trust if two independent licensed physicians certify that you are unable to manage your financial affairs. But with the passing of the federal HIPAA law, it is a felony for the doctor to certify that you are out of your mind unless they get your permission. But the doctor can’t get your permission because you’re out of your mind. This conundrum often leads to guardianship or conservatorship where the court can order a court appointed physician to certify competency. Once in guardianship, the courts aren’t going to let go and now you’ve become a ward of the state. Remove the two-doctor standard.
Problem 4: No Successor Trustee
One of the beauties of the Living Trust is that the person charged with distributing your assets doesn’t need to be appointed by the court. This is called the successor trustee. Most folks will appoint a successor trustee but fail to name a back-up for the successor. Your successor trustee may die, get sick or simply decline to serve. If that’s the case, your trust will be in probate where the court will appoint a successor.
Problem 5: Too Much Tax Planning
Married couples normally have too much estate tax planning in their Living Trusts. Originally, a Living Trust attorney could add complex provisions in the Living Trust to help reduce federal estate taxes. However, the couple would now need to have over $10.98 million of net worth before they need to be concerned about the estate tax. And it’s quite possible that President Trump will eliminate the tax all together. We recommend that if you are under the exemption of $10.98 million that you speak to a Living Trust