More and more frequently I am asked—why would I need a Trust? I can accomplish the same goals through other methods and for a much lower cost. After all, we no longer need a Trust for tax planning for the middle class—Florida does not have a standalone estate tax and, as of 2013, neither does Ohio. The only estate tax to plan around is the federal estate tax—currently set at a five million exemption and climbing. This leaves John and Sarah of Smalltown, Ohio, wondering why they went through the difficulty and expense of setting up a complex scheme and countless hours retitling assets [seemingly] all for naught.
It is true; trusts may be expensive—usually several thousand dollars, depending on the complexity and depending on the attorney involved. Set aside for a moment that the costs of a default probate administration may range from 4-6% of a person’s overall estate—easily adding up to tens of thousands in court fees and attorney expenses. Even still, this Trust quote alone will usually keep all but the well-off and motivated client from going forward. However, let’s take a moment to consider the costs of not having a Trust in today’s climate.
1.“I’ve set up everything to be joint and survivor/transfer on death/tenancies by the entireties—I’ve avoided the expense of probate without all the hassle.”
‘Without all the hassle’ may also mean- without having any sort of safety net or contingency plan. Let’s say for instance that someone is named who predeceases you; without proper maintenance, you’ve inadvertently created another Probate estate. Or worse, you’ve created a present right in another person [and that person’s personal creditors] to get at your assets while you’re alive. What happens if that person is incapacitated or unable to receive the assets outright upon your death? Guess what—another Probate scenario! This time you’ve created a Probate guardianship that may last for the lifetime of your beneficiary or until the assets are exhausted from expense and use (a more likely scenario).
2. “Everything just goes to my wife/husband/partner if something should happen to me, and if not, then to the kids.”
Just because you know how simple your plans are doesn’t mean the State of Florida does. Again, if you’ve left assets to a minor or an incapacitated person, you’ve done nothing to avoid the expenses and administrative burden of a probate administration. Also, you’ve impeded those you trust from being able to administer the assets efficiently without constant supervision from the Court and worse, outside parties who may believe ‘they should have an interest in the proceedings’. At what ages are your children to receive the assets? Are they to receive the full inheritance all at once? Probate will ensure that your children receive the monies in full at twenty one. While it may be great for Timmy to get that new Lamborghini, wouldn’t it be better for him in the long run to have some monies left for his education/first home/etc.?
In our practice, we find that the administrative “how” is just as important as the “who”. These are the reasons to seek counsel. Trusts are the surest and most flexible because the language does not create a hard and fast “how”, but instead contemplates any number of scenarios that you cannot account for through the use of the “joint and survivor” moniker. And sure, trusts may still not be the right route for everyone, but take a moment to consider if a trust may be the right route for you.
This article was written by Jessica B. Moon, Attorney licensed in Ohio and Florida. David Bacon and Jeffrey Roth, and Jessica Moon are Member Attorneys in Roth & Bacon Attorneys, LLC. Their Offices are located in Upper Sandusky, Marion, and Port Clinton, Ohio, and Fort Myers, Florida. They have focused their practice to provide estate and business planning concepts to their clients. Nothing in this article is intended for, nor should be relied upon as individual legal advice. The purpose of this article is to help educate the public on concepts of law as they pertain to estate and business planning.
Copyright @ Jessica B. Moon 2014.