Trust funds are a great way to ensure that your assets are managed and distributed according to your wishes after you pass away. However, there are some potential drawbacks to consider before setting up a trust fund. One of the main disadvantages of a trust fund is the cost. Some charge a percentage of the value of assets under management, while others charge per transaction.
In addition, you will have to pay federal income taxes on any income you receive from your investments and don't distribute to your beneficiaries. Another downside of a trust is the additional paperwork. For a living trust to be effective, you must ensure that ownership of all assets in the trust is legally transferred to you as a trustee. If an asset has a title (real estate, stock, mutual funds), you must change the title to prove that the property is now owned by the Trust.
Let's say you want to put your house in the Trust. To do this, you must prepare and sign a new deed to transfer the property to you as a trustee of the Trust. In the end, a little extra paperwork and recordkeeping is worth much more than the time and money that will be wasted on probate, not to mention the stress your family will have to go through to access your assets after you die. While these costs may be significantly lower than those associated with probate, it is important to recognize them and consider whether the value of your estate justifies the expense. Switchin g assets to a revocable trust won't save income or estate taxes.
While assets held in an irrevocable trust are generally out of reach for creditors, that is not true with a revocable trust. Here is California Probate Code 6402 that discusses how estate will pass to family members under the state's “intestate succession laws.”One of the first disadvantages is that a will is that it will still go through the probate process. After you die, which, if the time to distribute the assets to the beneficiaries and the cost is a factor, then you are considering 18 months up to liquidate the estate, not including having it done in public view. Yes, it is usually less expensive to establish a will than a trust, but in today's competitive landscape, the cost of establishing a trust has dropped dramatically.
Creating a living trust is not difficult or expensive, but it requires some paperwork. The first step is to create and print a trust document, which you must sign before a notary public. It's no more difficult than making a will. In most states, transfers of real estate to revocable living trusts are exempt from transfer taxes that are usually imposed on transfers of real estate. However, in some states, transferring real estate to your living trust could result in a tax. View real estate in the transfer of titled property to the trust.
There are more conditions for your heirs to inherit your property. A trust account can be as simple as a bank account in which the money is owned by a trust and not an individual. For example, if you want to put your house in your living trust, you must prepare and sign a new deed, transferring ownership to you as a trustee of the trust (or, in Colorado, to the trust itself).Many jurisdictions specifically exempt Professional Trust Companies (PTCs) from the requirement to be licensed and regulated, provided that they act solely as trustees of specific trusts or groups of trusts and do not solicit or provide trust company business to the public. This person chooses the rules behind the trust and decides what property the trust will own (transferring assets in the trust's name). The main disadvantages associated with trusts are their perception of irrevocability, loss of control over assets placed in trust and their costs. A professional third-party trust company may not be in a position to offer the trusteeship degree of flexibility and speed of response they require and will not be as familiar with the business of trust-owned companies as family members themselves. The fees charged by independent trust companies are generally more reasonable and make trusts affordable even for relatively modest properties. It is true that many major banks and other financial institutions charge substantial fees for establishing a trust while they also charge a percentage of trust assets in annual administration fees along with basis point fees for cash investments from underlying trusts. When looking at trusts funds many people are nervous that trustees will loot them for personal purposes. They should be sure enough if you show them a copy of your trust document which specifically gives you as trustee power to borrow against trust property. The biggest advantage of living trusts is that unlike last wills and testaments they allow you avoid probate court.
It also means they can be consulted on technical matters and free select best investments for trusts without being under pressure place money with in-house investment advisors ensure covert remuneration. Even with trusts as long as they are they often don't give trustees all information they need distribute assets. In general disadvantages trusts significantly offset by numerous advantages created having living trusts.Chris Atallah Michigan licensed attorney author “The Ultimate Guide Wills & Trusts — Estate Planning Michigan Families”.
