Could Boilerplate Estate Planning Do More Harm than Good?

The access provided by the Internet has justly raised some privacy concerns. In the realm of estate planning, individuals may have more reason than ever before to avoid a public probate proceeding.

Trusts are one way to transfer assets without the involvement of a probate court. However, not all trusts operate the same way. Different types of trusts can be created to accomplish different goals. Some may even be unsuited to an individual’s unique circumstances, as a recent article cautions.

Specifically, the article profiled so-called “living trust mills.” The term refers to entities that may charge high fees but only offer boilerplate documents. The companies may also sell annuities or other types of insurance products. Although these tools are not bad in themselves, the lack of customized planning could be. Trusts can be set up with great flexibility, including conditions on how income and/or trust principal will be distributed to the named beneficiaries. Without an attorney’s help, however, a one-size-fits-all approach may prove to be a bad fit.

In the case of a living trust, an individual may prefer this approach if he or she wants to avoid the delays, cost and public aspect of a probate proceeding. Assets transferred to the trust generally can pass to heirs without the involvement of a probate court. Since this type of trust is also revocable, it can be modified at any time by the grantor during his or her lifetime. That exercise of control usually means no tax benefits: control is one of several criteria by which tax authorities might determine who is responsible for paying taxes. After the grantor passes, however, the trust becomes irrevocable and the designated trustee assumes control over the trust.

Source: Consumer Affairs, “Consumers cautioned about ‘living trust mills’,” Mark Huffman, April 22, 2016