||Victoria went to a seminar on living trusts. The speaker said a living trust was a way to avoid the high cost of probate, which he said would eat up a third of her estate. She paid $1,500 for a living trust package. However, she did not understand that she had to personally transfer all of her property to the trust. She missed doing the paperwork on some items, so when she died her estate had to go through probate anyway. As it turned out, the probate fee was only $500.
In recent years, for-profit companies have aggressively promoted the sale of living trusts to seniors. They play on people's fears and misconceptions about probate and estate taxes, and promote living trusts as a suitable estate-planning tool for everyone. Probate is a legal process that oversees the transfer of property from a deceased person's estate to the beneficiaries. However, a living trust is NOT suitable for everyone's situation and living trust packages marketed at seminars, by postcard, and on the Internet, are usually a waste of money.
A living trust lets you direct how property you place in the trust will be distributed after your death. It allows your trust property to pass to your beneficiaries without going through the probate process. Living trusts can be useful if a person owns real estate in more than one state, anticipates that his or her will might be contested, or wants to have someone else manage his or her current assets. However, living trusts are not the best estate planning choice for most people in most circumstances.
Also, living trusts marketed by salespeople may use prepackaged forms that are not tailored to the consumer's individual circumstances, and may not comply with Michigan laws and regulations. These salespeople often:
- greatly exaggerate the cost and delay of probating a will. In fact, Michigan's probate process is relatively uncomplicated. Michigan has a streamlined procedure for small estates, and permits a less burdensome probate administration when the beneficiaries consist only of the decedent's spouse, children, or personal representative.
- falsely claim that a living trust will cost less than probate. In Michigan, probate fees are modest.
- sell trust documents that are not drafted by attorneys or are written by attorneys who are not licensed in the consumers' state.
- do not tell consumers that they must transfer all of their assets to the trust, or the estate will have to go through probate anyway.
The bottom line? A subject as important as estate planning should be discussed with professional counsel, not with a salesperson. Don't buy a living trust package that may not be valid and may be just a waste of money. To determine if a living trust is right for you, consult an attorney who is admitted to practice law in Michigan and who specializes in estates and trusts.
For more information:
The American Association of Retired Persons (AARP) offers the publication, "A Consumer's Guide to Living Trusts and Wills." See the AARP website at www.aarp.org
The Legal Hotline for Michigan Seniors provides free legal advice to any Michigan resident age 60 or older. To reach the Legal Hotline for Michigan Seniors, call1-800-347-5297.