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Consumers Should Seek Legal Advice Before Establishing Trusts

One size does not fit all. Therefore, anyone considering a revocable ("living") trust should use the services of a qualified, licensed attorney. People wanting to create trust documents need the assurance that competent lawyers who are familiar with these matters are advising them and are properly preparing the necessary documents. If you are considering a trust, be sure to work directly with a licensed Ohio attorney who will listen to your particular situation and create a trust to meet your personal needs. 

Q: Why would I  need an attorney to “fill out” a simple revocable trust document? 
A:
 Revocable trusts are more than filling in the blanks on a form. They are not advisable for everyone, and an attorney experienced in estate planning issues can help you decide if a revocable trust is really in your best interest. Further, if a revocable trust does make sense for you, a licensed Ohio attorney experienced in estate planning matters can make sure your revocable trust is drafted accurately and fits with your broader estate plan. 

Q: I thought everyone needed a revocable trust to avoid probate. Isn’t that true?
A: 
It is true that assets within a revocable trust generally do not come under the jurisdiction of the probate court, while assets owned in an individual name that are not payable on death generally will be subject to probate. However, you can use other methods to keep certain assets from being subject to probate. For example, jointly owned assets with rights of survivorship are not considered probate assets. Payable-on-death accounts such as life insurance or pension benefits, transfer-on-death registration for securities and transfer-on-death affidavits for real estate also will avoid probate. 

Q: Won’t I save estate taxes with a revocable trust, as compared with a will?
A:
 No. It is a common misconception that you can save on estate taxes with a revocable trust, but not with a will. While using a revocable trust may avoid probate proceedings, avoiding probate does not mean avoiding estate taxes. The assets in your revocable trust are part of your gross estate for estate tax purposes, just as probate assets are. Nevertheless, both the will and the revocable trust, when properly written and with advice on the proper ownership of assets during your lifetime, may allow you to avoid estate taxes.

Q: Can a revocable trust provide any income tax savings?
A:
 No. 

Q: Can I keep assets in a revocable trust and still qualify for Medicaid?
A:
 No. The assets in a revocable trust are countable resources for Medicaid purposes.

Q: Why wouldn’t everyone want a revocable trust?
A:
 A revocable trust can be a helpful estate planning tool. Advantages include privacy, personal control, possible cost savings after death, speed of transfer to beneficiaries, and the avoidance of multiple probate proceedings, especially when real property is owned in several different states.

There are also disadvantages. One disadvantage is that a revocable trust likely will take more time and effort than a will. Simply creating a revocable trust document is not enough. You also must transfer ownership and title of your assets into the trustee’s name, which means you will have to re-register, re-title or otherwise validly transfer the assets to the trustee of the revocable trust. Also, after you have created the revocable trust, you must make sure that assets you acquire later are placed into the revocable trust. Otherwise, those assets may pass through probate. 

While a revocable trust may save probate expenses after your death, maintaining a revocable trust generally costs more than creating a will. Also, most people still need a will to dispose of assets not included in the revocable trust. 

The administration of a revocable trust is not supervised by any court. While this may be less complicated and expensive than going through probate, the trustee will not be accountable to a judge for distributing assets honestly and accurately unless a beneficiary brings a lawsuit.

Consumers must be careful when making important legal decisions. Do your homework. Ask lots of questions. And take advantage of competent legal services from licensed, experienced attorneys. 

11/11/2013

Law You Can Use is a consumer legal information column provided by the Ohio State Bar Association (OSBA).​​

Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

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