Are there cheaper alternatives to living trusts?
While there are cheaper alternatives to living trusts, there are risks involved with each one of them. Therefore, it’s important to review the possible options with respect to the costs and their benefits vs setting up a living trust.
You can certainly draft your own will, but your beneficiaries will still have to go through probate in order to settle the estate which can be both time-consuming and costly. Another common estate planning budget strategy is to create “joint property ownership” between a parent and his or her child/children. On the surface, this may seem like an easy way to go to save money by getting around the time and cost of estate planning as well as the probate process.
However, there are potential problems when it comes to adding your child/children to your deed. Your property could end up being reassessed, resulting in higher property taxes for your beneficiaries. If your heirs sell the house after you’ve passed away at a much higher price than you originally paid for it, they could end up paying a huge difference in capital gains taxes.
Another cost-cutting option that some people choose is to set up joint accounts with their child/children for bank accounts as well as property ownership. Possible problems that could occur in the future such as bankruptcy, divorce, “overborrowing” on your accounts on the part of your child, or infighting among siblings could end up draining your accounts.
A revocable transfer on death deed is another cheaper alternative to drawing up a living trust, but, again, changes that could occur in your life, such as divorce or if the beneficiary predeceases you, could result in your assets going to the wrong people or having to go through probate after all.
Are they worth the savings?
So, are there cheaper alternatives to living trusts? The answer is “yes”. But, are they worth the savings? The answer is “no”. While setting up a living trust will cost more than drafting a will because it’s a more complicated legal document, in the end, a living trust can save your estate money because the distribution of the assets in your trust will not go through probate. Additionally, the additional costs of setting up a living trust are often offset by investment gains and tax savings.
Therefore, your family will be saved not only from the hassle of going through the probate process, but also from the costs involved. Unlike a will, which is a public document, a living trust is a private agreement and remains as such after your death.
A better solution
A living trust is one of the most effective and valuable estate planning options available today. Unlike some of the alternatives to living trusts, it can be easily changed or even revoked entirely if you wish to do so during your lifetime.
If you think that setting up a living trust is the best option for you, call the living trust experts at the Law Office of David W. Foley, located in San Diego, California.Schedule your FREE Consultation