Trusts have become an increasingly popular estate planning tool. Individuals with significant assets and complex family dynamics favor trusts to avoid the expense, public record, and protracted probate process. However, as attractive as trusts can be for some, they aren’t the right choice for everyone and there can be disadvantages. To make the proper estate planning decision for your family, Texas trusts attorneys strongly encourage you to consider not only the aforementioned trust benefits but also a few common disadvantages associated with trusts.
What are the Disadvantages of a Trust?
When a decedent passes with only a will in place, the decedent’s estate is subject to probate. In probate, the court reviews the estate and ensures debts are paid, and remaining assets are distributed appropriately. The court process is costly, and expenses can quickly add up to significant sums between court fees, attorneys’ fees, executor fees, bond fees, and appraisal fees.
Trusts help clients avoid probate and its related expenses, but they aren’t free. Trust-related costs are typically incurred during the initial planning and structuring of the trust, and may also include later administration expenses:
- Legal counsel to prepare and draft the trust
- Property registration and title transfer fees
- Filing fees
- Compensation to the trustee managing the trust
While these costs may be significantly less than those associated with probate, it’s important to recognize them and consider if your estate’s value warrants the expense.
2. Record Keeping
It is essential to maintain detailed records of property transferred into and out of a trust. Personal property, real-estate holdings, and financial assets must be transferred into the trust, and the trust should own new assets.
While this seems simple, this is where many people falter, especially if there are numerous or frequently traded real-estate and financial holdings. If you are not a naturally detailed-oriented, organized person, trusts may prove more cumbersome and time-consuming than you would prefer.
3. No Protection from Creditors
Even after you’re gone, creditors have a right to collect debts owed to them. Generally, most estates pay the decedent’s debts and then proceed to distribute the remaining assets. If you have debts that significantly encumber your estate, note that trusts do not restrict debtors from collecting.
Once creditors locate your assets or your estate’s heirs, they can file a lawsuit to collect the debt. There are no time constraints to file the action, and there is no formal claims process.
Probate, however, might offer estates a layer of protection against debt collectors. From the date the debt collector is notified of a probate proceeding, they have a limited time, generally about six months, to file their claim and pursue debt collection.
Sometimes, the expense and hassle of legal proceedings are enough to dissuade creditors from collecting debts.
Seek Guidance from an Experienced Texas Trusts Attorney
Estate planning is not a one-size-fits-all solution for the masses. Each family has a unique financial picture and family structure that should be carefully weighed against legacy options.
Trusts provide great flexibility to families wishing to retain control over their lifetime assets while documenting specific instructions regarding the distribution of wealth after death. A good estate planning lawyer will explain those benefits and advise that trusts require some initial cost and ongoing management to be most effective.
If your family has or is considering a trust, meeting with a qualified trust attorney is critical. For most, the benefits of trusts far outweigh any minor disadvantages. Only you and your trust attorney can determine the best path concerning your estate and beneficiaries.
Contact the Law Office of Carey Thompson today for a comprehensive consultation and a plan for your future.