Do I Need to Hire a Living Trust Lawyer?

Many people who want to create a living trust contemplate hiring a living trust lawyer. Hiring an attorney can have starting costs between $1,200 to $2,000.

Hiring a trust attorney will bring you peace of mind. You can be confident that your estate planning lawyer will draft a sound legal document. It will comply with your directives and applicable law.

For simple situations, you can use do-it-yourself books or software. If a DIY process meets your needs, you can complete your revocable living trust for less than $100. Many people create their own forms to reduce costs and have a living trust attorney review their documents. This type of client relationship is called a limited-scope representation.

It’s helpful to understand trust basics to determine whether you need a trust. From there, you can evaluate whether you need an attorney to assist in setting up a trust or with trust administration.

What Is a Trust?

Trusts allow people to determine the distribution of their property after they die. A grantor may maintain some control over their property while they are alive by using a trust.

A trust can be simple or complicated to create. It all depends on your assets and family situation.

Trusts often are misunderstood. A trust is a legal relationship through which someone manages assets for the benefit of another person. A trust is not a document, but you must draft a trust document to create a trust.

Like a will, a trust is a way to ensure your property’s distribution aligns with your wishes. Unlike a will, which does not take effect until the person dies, a trust can begin operating as soon as it is signed and funded.

What Is a Living Trust?

A living trust is a trust created during life. A grantor creates a living trust to save tax money or establish a long-term way to manage the trust property. Living trusts are designed to:

• Avoid probate
• Safeguard financial privacy
• Manage assets should the owner pass away or become incapacitated

The reasons for creating a living trust are highly variable. Before undertaking the process, you should be clear on your reasons for creating and funding a living trust.

When Should I Have a Trust?

A trust is not necessarily for everyone. If you are single, have no children, rent your home or apartment, and do not own significant assets, you likely do not need a trust.

If you have minor children, a child with special needs, or significant assets, it’s wise to explore a trust for your estate.

Typical reasons for having a trust are:

• Avoiding the probate process and the costs and time associated with it
• Protecting assets for children until they are mature enough to own and manage them
• Avoiding or reducing estate taxes
• Having more flexibility than a will
• Managing assets when the settlor is incapacitated
• Preventing finances from becoming public record in probate court

Most people do not need to worry about estate taxes. Few states have estate or inheritance taxes. The federal government only assesses such taxes on estates with significant assets. However, Congress revises estate tax laws from time. Before creating your trust, you should know the applicable estate tax exemption.

Merely having a trust does not automatically mean lower estate taxes. You will need an irrevocable trust that contains the necessary terms to avoid or reduce your estate tax liability. When your net worth is close to the estate tax exemption, consult an estate planning attorney.

Living Trust Basics

The ease of creating a living trust is comparable to creating a last will and testament, which many people do without the help of a lawyer. But funding and administering the trust make it more labor-intensive than a will.

Types of Trusts

A trust can be revocable or irrevocable. Most people choose a revocable trust because they want to retain the power to revoke or amend it.

An irrevocable trust can be beneficial for tax purposes. There are more practical options for most people, though. It cannot be revoked or amended except under limited circumstances.

A living trust is a trust used to manage property while you are still alive. A testamentary trust is a trust created through a will. It only becomes effective after the person who made the will dies.

How Do I Create a Living Trust?

A living trust document usually starts with a very basic template and includes the following information:

• The creator of the trust (your name if it’s your trust) is called the "settlor" or "grantor."
• The trustee is the person in charge of managing the trust (this also may be your name if it’s your trust).
• A successor trustee is a person who will take over managing the trust and distributing the property when the original trustee dies or becomes incapacitated. The successor trustee is usually a spouse, close friend, or adult child.
• The beneficiaries are the people who benefit from the trust’s property (the same as in a will).
• Delegated trustees are trustees who will manage any property left to young beneficiaries. Oftentimes, when children or young adults inherit property from a trust, there is a delegated trustee. They manage the property for beneficiaries until they are mature and competent enough to manage it themselves.

After you have drafted your trust with all the pertinent information, sign it before a notary. Then, to make it effective, use a deed or standard transfer document to transfer the property into the trustee’s name. This process should follow the trust’s terms.

Your next step is to fund the trust. This involves transferring ownership of the property to the trust. Real estate will require a deed. You should retitle other assets in the trust’s name as well.

You also can add a provision to a will that makes the trust the beneficiary of any assets you fail to place in your trust or name in your will. These assets, however, will go through probate and will not transfer to the trust immediately.

Who Should Be the Trustee?

You should be the initial trustee to maintain control over your assets unless you create an irrevocable trust. It would be best if you named a successor trustee.

The successor trustee will manage the trust after you die or become incapacitated. It is also a good idea to name additional successor trustees. They will manage the trust if your first successor trustee cannot serve.

Your successor trustees should be people you trust to manage your assets. Do not micromanage your trustees. It’s best to minimize lists of what the successor trustee can do. Choose responsible, financially prudent people you believe will make good decisions. This way, you can feel good about allowing the trustee discretion. After all, it is called a trust, not a mandate.

When Should I Use a Lawyer?

Why not do it yourself? Some situations may necessitate involving a lawyer well-versed in estate planning law. If any of the following apply, you should get assistance.

• You have a unique situation
• You need a special needs trust
• You are overwhelmed by a complex or large estate

Hiring a living trust lawyer can help you sort out any questions or handle creating a complicated living trust.

Additionally, a grantor should consider hiring an attorney if any of the following circumstances apply:

• Your net worth is close to the estate tax exemption, and you could use assistance with tax planning
• You have a child with special needs
• You need advice about funding the trust
• You want to discuss using life insurance policies to fund a trust
• You want to discuss asset protection
• You want to include complicated conditions dictating how and when beneficiaries receive assets

Hiring an attorney to create a trust usually will cost more than other estate planning documents. However, paying the upfront cost for sound legal advice can save you and your family members money in the future.

Even if your trust is simple, you should consider speaking with an attorney. An attorney can review the trust you created. They can also advise you about laws that are specific to your state.

Drafting a Living Trust? An Attorney Can Make Sure It’s Valid

Educating yourself about living trusts and other forms of financial planning is wise. But you can hardly be expected to become an expert overnight.

A lawyer can use their knowledge of the law and experience in estate planning to help you establish financial structures that meet your needs. Whether you need a will, health care directives, a power of attorney, or a trust, an attorney can help.

Contact a local estate planning attorney to learn how they can help address your living trust concerns.