Bay
Financial Newsletter
"TRUST
MILLS" - CLEAR AND PRESENT DANGERS
Remember
the police show where, at the end of each day's daily briefing, the
sergeant told the officers to BE CAREFUL OUT THERE!
PANIC AND PANACEA
Being careful out there is good advice. The odds are good that someday,
you'll be invited to an "estate planning seminar" where the promoters
will predict the incredible expenses, numerous delays, and awful frustrations
your heirs will encounter during the probate process. Then the trust
promoter will promise that all of these problems will be solved if
you purchase the promoter's package of forms or services.
This is the classic "panic them and then sell them the panacea" routine.
First, they instill panic at the prospect of probate as an overly
complex and expensive process (which it generally is not in most states).
Then they claim or imply, "If you buy my book or set up this trust,
all your estate and financial planning problems are solved." Purchase
my book, fill out the forms, pull them out, sign them, and "beat the
probate system." This is unrealistic thinking, and is as dangerous
as treating a life threatening medical problem with a home or over-the-counter
remedy.
A revocable living trust is one of many available estate planning
tools. It is an excellent and highly flexible tool - if and when it
is drafted by a knowledgeable, competent estate planning lawyer and
coordinated with other wealth management/transfer and estate planning
tools and techniques and individualized to fit your personal needs,
circumstances, and objectives.
But a revocable living trust is a potentially dangerous and harmful
device when used as a one-size-fits-all, "do-it-yourself" panacea,
or in an unsuited manner and without regard to an effective, over-all
estate plan. As explained above, fear mongers use (or misuse) the
revocable living trust to sell their books or other products or services
- generally with little or no regard to your tax and non-tax objectives.
THE PROBLEMS WITH TRUST MILLS
What are some of the problems with these "trust mills"? The trusts
that are sold are usually not tailored to your specific needs but
are mass produced from standard forms. Sometimes, the forms are not
even very well prepared, causing tax problems that would (and could)
have been avoided with competent drafting. Signing a trust document
is only part of the solution. If the purpose of the trust is to avoid
the probate process, then your assets must be transferred to the trust.
Otherwise, the trust is worthless as a probate avoidance device. And
yet most trust promoters don't take responsibility for, or oversee,
the transfer of assets, and do not adequately explain the procedure
to you. Worse yet, the generic trusts that are sold are frequently
over-priced - with the trust promoter charging exorbitant fees for
what amounts to pre-printed forms. Often, the fee is considerably
higher than what would have been charged by a qualified lawyer for
a customized document and individual and highly specific tax and legal
advice.
The sale of a trust package, where the product precedes the problem
(or solution), is the antithesis of good planning. Proper planning
should be a process which begins with an investigation of your problems
and goals, and ends with the selection and implementation of one or
more appropriate tools or techniques - that would solve your problems
and achieve your goals in the most efficient and cost effective manner
possible. When the trust promoter has only a single product to sell,
then the investigative process of delving into many important (but
unaddressed) issues and searching for viable alternatives or a more
efficient mix of solutions is all but foreclosed.
View probate avoidance as one of many possible estate planning objectives,
and consider the revocable living trust as another highly useful tool
that, in many cases may (and, in our opinion, often should) be used
in conjunction with a will and other appropriate and complementary
wealth management/transfer and estate planning devices.
AS ALWAYS, PLEASE FEEL FREE TO CALL TO DISCUSS THESE AND OTHER FINANCIAL
ISSUES OF CONCERN.
Securities offered through LPL Financial Member FINRA/SIPC
