All About Living Trusts
Living trust 101
A living trust is a basic concept in estate planning. It is the most popular estate planning tool after wills. A living trust is designed to hold your assets while you are alive. At your death, a trustee takes over and distributes your assets according to your trust. Like a will, a trust distributes your assets at death.
The main difference between a trust and a will is that unlike a will, a trust does not go through a court procedure called probate.
Probate is a long process to determine a deceased’s assets and pay debts. Many people want to avoid court. A living trust is a way to hold onto assets without subjecting those assets to probate.
A living trust can save you money. The trust assets can be distributed without hiring a probate attorney and going through the probate process. You avoid more attorney fees by avoiding probate.
A living trust is a way to hold onto assets while you are alive and name a successor owner at your death. This is unlike a will that simply names the person to receive the assets from your account at your death , but does not provide that a person can take over the account while you are alive and incapacitated.
You want to consider a living trust if you have a high net worth and want to avoid probate.
Who needs a living trust?
An Estate Planning attorney will recommend that you consider a living trust if:
These are just some suggestions. Your estate planning attorney will take all of your assets and your family situation into consideration and determine whether a living trust is appropriate for you.
What LegalZoom Can Provide for Living Trusts
If you decide to go the legal "do it yourself" route, LegalZoom is the best option for setting up a Living Trust. They offer a relatively easy 9 step process that allows you to cover the basics when it comes to getting your estate in order. Your trust will cost anywhere between $179 and $279 depending on the complexity of the trust you require. The higher end of the price range is for people who have children or may be disinheriting family members. A simple trust that involves no children and no disinheriting family members generally will run you around $179.
The first step requires the identification of all your assets. You will need to provide the value, location and who will be the recipient of the proceeds should you pass away. The second step in the process is the determination of whether you can trust anyone to manage the estate. This is a broader question than you might realize. You might think that your spouse should be the Executive, but what if your relationship with that person deteriorates? Would you want the decision to go to a family member that you don’t trust?
The third and fourth steps require that you identify your children and spouse properly. If you have minor children, they will be covered by the trust, but if a child is now an adult, you might not want to give them a 1/3rd majority of your estate when they are no longer in need of it. The fifth and sixth steps are designed to identify who you would like to receive the money, and how your possessions should be divided. Your options are numerous, but again you will need to determine whether you want full control over the assets or to give your heirs full control. The seventh step identifies a guardian for your children, which is where people start to believe they need to hire an attorney. Many attorneys avoid this provision simply because there is so much potential for litigation over who should be the guardian of the children. The eighth step is the level of detail you want in your estate plan. It can be basic, detailed or somewhere in between. Typically, the more detailed the plan, the more money it costs. Finally, the legal site asks you to review the selections and then make the payment. The entire process will take approximately 30 minutes.
Advantages and Disadvantages of LegalZoom
One of the obvious advantages of using LegalZoom to create a living trust is the low cost. Typically, you can purchase everything that you need from LegalZoom to create a living trust for under $300. They offer a "basic estate plan bundle" for just $149, which is very appealing to budgets.
Another big advantage is convenience. You can access LegalZoom and create your living trust in the comfort of your own home. And, because you only need minimal guidance from an attorney when you create a living trust, LegalZoom allows you to handle most of the process on your own. If you know exactly what you want and need from your estate documents, then LegalZoom can be a great option.
However, because you don’t have much interaction with an attorney through LegalZoom, there are different ways that they could fail to meet your needs. For example, it can be hard to fill in some of the fields in the questionnaire if you don’t fully understand them or you don’t know what information to include (or leave off) in the document. You might also be confused about how to use the document after you’ve finished creating it—such as where and how to store it—or have difficulty getting your questions answered about the document you created. The possibility for confusion and accidents increases when you aren’t face-to-face with an attorney.
What Attorneys Can Provide for Living Trusts
Estate Planning Attorneys have the education, training, and experience to offer living trusts with several advantages over online documents. With an estate planning attorney, you have relationships and can make adjustments according to your needs. An online document preparation service cannot extend the same level of personal attention.
An attorney will help you understand the following: An attorney allows you to make an informed and educated decision. As a professional, the attorney has experience, knowledge, and facts to help you make the right decision. An online service cannot make such a commitment.
Also, the relationship with your attorney continues into the future. Estate planning is not a one-time thing. It involves all kinds of events that occur long before death, including: If you do not have an attorney, it will be hard to find someone trustworthy when you need it.
Your estate plan may need some revision due to changes in state laws, or when your circumstances change. Your personal situation may change, such as divorce, remarriage, change of assets, incapacity issues, or relocation. These changes may require updating your estate plan.
Attorneys have experience in determining what your needs are. It is not a cookie-cutter approach because every client is different. Also, the attorney learns like your situation, and can see common mistakes and errors, and how to correct them.
Attorneys can also provide estate planning advice, and guidance after the plan is completed. Your attorney will have knowledge and insight about your plan that allows them to spot problems before they happen, and provide recommendations to make your estate plan work for you.
Advantages and Disadvantages of Hiring an Attorney
The primary advantage of using an attorney for a Living Trust is not having to do all the work yourself. With an attorney, you have someone who is familiar with all the different aspects of the process and you can delegate the gathering of documents and other project work to someone else. The attorney will typically do the heavy lifting by drafting the documents and then you will have to make the final decisions on things like assets to be transferred into your Trust.
Costs vary depending on the complexity of your estate. Most Trust packages fall in the $1,000-3,000 range. The costs should include both the drafting of the Trust document, as well as asset transfers to your Trust like Deeds of real estate or updates to beneficiary designations to ensure everything you have is covered. The cost of the Living Trust is typically much less than the costs involved with settling your estate if you die without a Trust or a Will and have to go through the probate process.
You can and should consult with an estate planning attorney for 30 minutes or even an hour at very little cost. You can have your questions answered and really start to understand what a Trust would do for you and whether or not it is the right fit for your family.
Using an attorney also means that you get their backing after the documents are dictated. This is a big deal because in our experience, most disputes come up later when Trusts are being amended or revised. It is rare that anyone tries to dispute the original terms of the Trust so the willingness of your attorney to appear at a court is a huge advantage.
Cost Comparison: LegalZoom vs. Attorney
When it comes to the cost of creating a living trust, LegalZoom advertises upfront pricing. The LegalZoom website details the price for their product at $295 plus state filing fees. The fee that is quoted for the living trust document includes customer access to the LegalZoom money back satisfaction guarantee. The price for a living trust through LegalZoom includes access to a single trust document that is usually delivered electronically by email. Overall, the total price and fees issued by LegalZoom for the cost of a living trust seems to be affordable and accessible for most people. When comparing prices with an attorney , the cost of creating a living trust varies. Most attorneys will provide a flat rate for creating a living trust. The initial meeting with an attorney is often free, or when charged, only a few hundred dollars and depending on the complexity of the trust, may even include the costs for the living trust document as well. On the legal notice, lawyers are not allowed to guarantee results or make statements that any one result is typical. However, the price of a living trust through an attorney will lead you to expect a higher cost.
Considerations for Choosing the Right Option
In the end, your decision on whether to create your living trust through an online service like LegalZoom or via attorney largely depends on your answer to the following four questions:
- How complicated is your estate?
- How much do you want to spend on the creation of your living trust?
- How comfortable are you with online forms and explanations of the process?
- How much direct consultation and assistance do you want from an estate planning attorney?
These questions will help you determine the best option for you. But first, a few more general factors to keep in mind.
Case Studies and Real-Life Scenarios
To give Life & Law Blog readers a feel for the experience and how different these processes are, I have included some case studies and real-life examples below.
Sally – 50 female single – likes to do research. She bought the book "Beginning Estate Planning" by Denis Clifford, and she gave it a good read – and followed the directions. She decided to use Legal Zoom to create her trust. She found the process easy and inexpensive (just over half the price of having an estate attorney create the trust documents for her). She had a lot of questions and spent a lot of time on the phone speaking with someone who was very nice, but not in the business. It took a few weeks and phone calls to get the trust created and getting everything done took several months. She was disappointed that she wasn’t able to speak with a live person, however she got the trust completed and loves it. She feels good about saving money and ultimately got the trust done in a short period of time.
Gary – 40 male married with children. He gave his mom a Legal Zoom package for her birthday. He thought it was a good idea at the time, believing it was pretty easy. He witnessed his mother alone signing the trust document as if he was witnessing a contract or check. He really didn’t know what he was witnessing however. In fact, it would have been so easy to forge his name on the witnessing line. He never received a copy of the final trust his mom signed and says it didn’t really make sense to him. He knows he should have been more involved in the process. Ultimately, he realizes that he doesn’t know if the Legal Zoom trust was created correctly and hopes he doesn’t have to find out the hard way.
John – 65 male widowed. John’s attorney friend created John’s living revocable trust. John doesn’t read much, however he feels confident that his attorney friend created the trust properly since he knows a lot about the process and he knows a lot about John. It’s no big deal right? John doesn’t think so. He tells me he has a lot of trust in his friend.
Gina – 60 female divorced with children. Gina believes she probably needs a trust. She fears probate because her brother went through probate in 1997 and it cost over $30,000. She wants a trust but she isn’t certain what is wrong with a pour-over will. She doesn’t have money – she tells me that she is living check-to-check and a trust is a big ticket item that she would have to save for. She fills out the Legal Zoom questionnaire.
Will – 40 male recently married and his wife has children. Will is young and still in the early stages of his career. He hasn’t given much thought to estate planning considering that his wife is younger than him and he has a good amount of life insurance in case something happens to him. He just doesn’t believe it is important right now, despite what everyone is telling him. He attended a free estate planning seminar and learned a little more about what a living trust is and what it does. He learned that a will doesn’t avoid probate and only creates a delay, and Will learned that you don’t want someone else to make your decisions if you are incapacitated. That said, Will really doesn’t have the money to spend now on a living trust. He reads the Wall Street Journal and the Kiplinger report.
Conclusion: The Best Approach for Your Estate Plans
In the end, the decision between LegalZoom or an attorney is a personal choice. While LegalZoom may be the right choice for those who have simple estate planning needs, do not own any real estate, or have any special estate planning considerations, and prefer to be able to do everything via telephone and the internet, it can have drawbacks. At its best, LegalZoom is a good tool to create a basic estate planning document. That said, people who use it without seeking a consultation with an estate planning attorney risk their estate plans being tainted with serious mistakes. Every legal form preparation service, including LegalZoom, as well as self-populated forms found online, are prepared based on your unique and specific facts and circumstances. Most of the forms which generate via programs (LegalZoom included) do not consider your specific state’s laws. Have you moved from a different state? Do you have beneficiaries (children , grandchildren, a spouse, parents, etc.) in a different state? Have you ever been married or divorced? Did you remarry? Do you have step-children? These are just a few of many questions that should be considered in your specific situation. If your estate does not go through probate, chances are that you will never find out what mistakes LegalZoom made in your documents. And even an experienced attorney may not catch the mistakes made by LegalZoom unless he or she has your documents before you sign them.
When looking at your individual needs and priorities, you will have to decide for yourself the level of confidence and comfort that you need to have about your estate plan, and then base your decision about whether to hire an attorney or LegalZoom on those needs.