Interesting Animal, The Living Trust

The misinformation and misunderstanding of trusts as an estate planning tool runs rampant these days.  While on one hand, you hear popular personalities that give financial advice, who extol the virtues of the living trust (Suze Orman is one of these), on the other hand, a number of financial personalities are conflicted on the need for such an advanced tool.  One such personality has provided conflicting advice concerning the revocable living trust.

Recently in his newspaper column, Dave Ramsey a fairly popular financial advice radio host gave his opinion of what he called “an animal running around called a living trust.”  He stated, “This is a document that will cost you anywhere from $1,500 to $4,000 to have drawn up, and it’s really overdone in the estate planning world. It’s not needed nearly as much as some people would have you think. To tell the truth, it’s more of a gimmick than anything else. The idea is that you put everything you own in trust now, and when you die you save on probate taxes.  It’s a good theory, but the downside is that once you do it you have to operate your life in a trust. And that’s a real pain in the b***!”

Therefore, while conceding that “it’s a good theory,” Ramsey tells us not to use one because it’s a “gimmick” and such a “pain”.  Yet in a radio broadcast not long before the column was written, Ramsey states, “the living trust has some advantages …. It helps you get privacy while you are alive and helps you avoid probate tax on the state level.”   He then states, “A living trust does not make sense economically unless you have assets over $400,000, and it requires a lot of work.  I would suggest you consult an advisor specifically about your situation.”

If you are confused about what Ramsey is telling us, you’re not alone.  I would wager that Ramsey does not have a living trust and, therefore, cannot speak to what a “pain” it might be.  Yet, we have over two thousand clients who agree that a “living trust has some advantages” and have designed and implemented an estate plan with a living trust as the foundation.  They have protected themselves and their children and often their grandchildren from the reach of the government, creditors, ex-spouses, etc., and ensured the privacy of themselves and their families.  To this end, none of them feels the living trust is a “pain in the b***” or a “lot of work”.  Rather, if it is a labor, it is a labor of love.

If you find yourself confused with “advice” circulating about the use of living trusts and whether one is the appropriate tool for you, do as Dave instructed the radio caller “consult a [qualified] advisor specifically about your situation.”  If you have questions, please call us for a free consultation and we’ll help you sort out what tools work best to meet your needs.