A living trust can be a very important tool for estate planning. However, living trusts may not be the perfect plan for everyone

Even if you have a modest estate, a "living trust" can be an important estate-planning tool which gives you control over your assets while you’re alive, and allows you to transfer your assets to your heirs without having to go through the time and expense of probate. But there are many mistaken beliefs about "living trusts," and the AARP (American Association of Retired Persons) recently reported that, since the first of the year, there has been an upsurge of deceptive telemarketing calls, mass mailings and newspaper ads that are designed to lure consumers into paying a lot of money for something they may not need.

Before going further, the definition of a "living trust" is simply a trust that is established during your lifetime. Under a living trust agreement, you select a trustee to hold your property for your benefit during your lifetime pursuant to the terms of a trust agreement.

You have total control over these assets because you retain the right to amend or revoke the trust agreement at any time. Upon your death, the property held by the trustee would then be passed to the beneficiaries designated in your trust agreement without having to pass through the probate court, thereby avoiding the delays, cost and public nature of probate.

The advantages of having a living trust are, most importantly, that assets funded into the trust will avoid probate, and because assets distributed through a trust pass outside of the probate court, there is no public record of the distributions. Living trusts also reduce estate taxes while providing for a surviving spouse. Additionally, in a living trust, you can determine when income or principal will be distributed to the beneficiaries. You may set the ages and purposes (e.g., health, education, support) for which a trustee distributes income or principal to a beneficiary. Furthermore, a living trust provides that assets pass to your children upon the death of your surviving spouse, thereby making a living trust a particularly useful estate planning tool in a remarriage situation. Finally, living trusts protect assets from a beneficiary’s creditors.

There are, however, some disadvantages, to living trusts. First, there is no one to supervise an inexperienced trustee. If an inexperienced trustee makes a mistake, no one may ever know about it. Second, to avoid probate, you have to take the steps necessary to transfer your assets into your trust or change the beneficiary designations. It will take time to process the paperwork and expenses to draft the trust agreement properly. Third, a living trust will cost more to draft than a simple Will.

Sad to say, there are companies churning out "standard" living trusts and selling their services in seminars, by direct mail, and by telemarketing. Having no concern for your overall estate plan, these companies try to sell a living trust in a "one-size-fits-all" package. This can have a detrimental affect with estate planning and could result in the transfer of property to the wrong heirs, while costing you a great deal of money in preparing the living trust agreement.

In most cases, such companies claim to use the services of an attorney. Usually, however, the attorney is only a front man for the company and does not play any part in creating an estate plan or living trust. Also, such companies make false claims about the benefits of a living trust by exaggerating the beneficial effect of a living trust when it comes to asset protection and Medicare. If you have issues regarding asset protection or Medicare, you must consult an attorney who understands such complicated issues.

Here are some ways to spot deceptive "living trust" companies:

They often sell living trusts door-to-door, through seminars or through telemarketers, without giving you any way to check the credentials of the sales person or company.

Some companies will use "sound alike" names, thereby confusing their services with legitimate non-profit organizations like AARP.

Companies will try to sell self-help kits, requiring that you transfer your assets without explaining the proper way of doing so and with no supervision.

There are some companies whose goal could be to steal your identity, or to gather other information about you to use for other purposes.

They may tell you that without this device, all of your assets will be taken away in an expensive probate proceeding.

They’ll charge small fees and offer discounts if you sign up immediately.

They use living trusts as a pretext to try and sell you annuities or insurance.

High pressure tactics are used in every one of these cases. The rule of thumb would be to not make a decision while "under the gun" and to consult with licensed estate planning professionals (such as an attorney or financial advisor) before going down this road.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.