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| Best Practices |
Living Arrangements
Melissa Phipps
05/03/2004
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TOP VIEW
Living trusts have been marketed aggressively in recent years and have gained an
unwholesome reputation. But they can be invaluable tools for those seeking to
maintain some control of their assets in case of disability, and those who wish
to avoid probate in case of death. To accomplish this, our living trusts must be
tailored to our individual needs; the one-size-fits-all approach does not
work.
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Attorneys commonly complain that the
rules and regulations regarding the administration of a trust are not as
detailed and complete as that of probate, says Robert A. Huth, a law
practitioner in Boca Raton, Fla. “With a will, you know exactly where you stand
in the administration process. Here, things are not as certain.” His solution is
to draft into the trust the necessary details, so there can be no confusion
about taxes and income and principal distribution.
Problems may also arise
because living trusts can cause our estates to be exposed to creditors for
longer periods of time than they are when dispensed via a will. When assets go
through probate, an announcement is made to the estate’s creditors, who have
only a limited time (typically a year or less) in which to make a claim.
Creditors are almost always granted a longer period of time to make a claim on
assets held in trust. In fact, there may be no statute of limitations for
creditor claims if, upon the death of the grantor, the trust’s administrator
fails to give those creditors appropriate notice.
For these reasons, when it
comes to drafting and administering a living trust, competency is key. It is
important to discuss the provisions of the document in detail with an advisor
and estate planner. While do-it-yourself software programs and trust mills can
generate reams of living trust documents, they are only valuable when crafted
with each individual’s specific situation, needs and goals in mind. “You may
know what you want, but you need to make sure that everything is stated
correctly in the trust,” says Jay Shein of Compass Financial Planning in
Lighthouse Point, Fla. “I know a lot about this stuff, but I surely wouldn’t do
one on my own.”
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