When Living Trust and Estate Planning, One Size Does NOT Fit All

A living trust is a complicated estate planning document meant to provide an individual with a large and complex estate the means through which to plan their family's inheritance, in a way that affords greater flexibility than a last will and testament or most other documents. Trusts are drafted and signed by a grantor and trustee, for the benefit of an assigned beneficiary (or several).

The point of trusts is that they are versatile, flexible, and capable of more than your average estate planning document. They are also time-consuming and costly to set up, meaning that most people have to crunch the numbers and figure out if the benefits outweigh the cost.

Because of that, the idiosyncrasy of an affordable cookie-cutter living trust has become quite popular on the Internet. But the reality is that a one-size-fits-all trust is a bad trust, and a well-crafted living trust is all about specificity as well as choosing the right professionals to help you design and draft the document.

Why One-Size-Fits-All Living Trusts Are Not Trustworthy

Living trusts need to be designed as per each state's probate code, and as per the unique needs and requests of the trust's grantor.

Even a small clerical error can potentially void a trust, and lead to a big legal disaster and serious fees. The cost of a trust that is not up-to-code or includes an error will often outweigh the cost of a proper professionally-crafted trust; and if your estate truly needs a living trust, then the benefits of getting one drafted and notarized will far outweigh any potential downsides or short-term costs.

For example: if you have a child with special needs, they may be incapable of managing their own finances in adulthood. They will also likely outlive you, meaning there is a chance that your child will not have a specified caregiver after you and your spouse pass away.

A special needs trust can be drafted and notarized to provide for your child long after you are gone, should anything happen to you and the rest of the family. Such a trust would not simply dump a portion of your estate into your child's lap - rather, it would stay active throughout your child's life, giving a responsible trustee access to a portion of the estate to help manage your child's finances.

The trustee would be legally obligated to uphold their fiduciary duty to your child, while your trust ensures that the estate money given to your child is used responsibly and with their best interests at heart.

Trusts can also be used to avoid certain creditors from taking portions of your estate that are assigned to your children. They can protect your assets through an irrevocable living trust, or protect your heirs from themselves.

A trust's purpose must be clearly outlined in its document, and it must be drafted in such a way that ensures that it remains state-specific and perfectly represents what the grantor needs it to represent. Because of that, it is important to draft a trust from scratch with the help of an experienced professional who understands all of the details of local estate planning law.

Hiring a Reputable Estate Planning Professional

When it comes to estate planning, the most important thing is location. You need to find an established firm in your area, set up by an experienced attorney with an expertise in family law and trusts.

Finding a firm with a reputation you can be confident in is important as well. Ideally, you would want to involve people you can trust in your estate planning affairs. Setting up a living trust requires a grantor (you) and a trustee, to manage the trust after you pass. In some cases, however, you may simply not know anyone capable of carrying out that task.

While your lawyer is likely not going to agree with being your trustee, it is likely that their law firm is partnered with a good trust company to act in your interest. A professional trustee carries special legal obligations to fulfill their fiduciary duty, providing some comfort in the fact that your trust would be in capable hands.

Estate Plans, Trusts & Beyond

Cookie-cutter estate planning carries tremendous risk: there is a reason that websites are required to inform customers (per disclaimer) that their advice and templates do not substitute for advice from a hired lawyer, or a real personally-drafted legal document.

Trust laws can and do change from state to state, and your situation will likely be very different from that of another person. You may own property in several different states, which means that you need an estate plan that covers this issue:one which takes into account the different real estate laws throughout the country, as well as the matter of ancillary probate.

Wills, living trusts, living wills, and power of attorney documents should be drafted by a professional, working closely with you to coordinate an effective estate plan that keeps money in your pocket and also gives your family the best shot at a hassle-free inheritance process after you pass away.

Consider Your Unique Needs & Circumstances

An important question to ask is whether a trust is wholly necessary for you in the first place. The thing about living trusts is that they are often advertised as being capable of more than they actually are, and they are touted as an affordable alternative to the probate process. The reality is that a living trust is a very useful tool, and it may be a critical tool in some larger estates – but for many people, there are other, easier ways to minimize the probate process.

Consider the size of your estate, the breadth of your assets, and what the needs of your family will be after you pass away. Under certain circumstances, a living trust is worth it. Under others, it won’t be necessary. Meeting with an estate planning professional before choosing which direction you are going to take in your estate planning process will help you make the best decision.