It’s said that you get what you pay for, so it only makes sense that the simpler your estate plan is, the less you’ll have to come out of pocket to arrange for it. If you own considerable assets, however, or if you want to provide for other eventualities in addition to your death, a living trust might be in order. It will cost a little more upfront, but it can save your estate the costs of probate in the end.
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Creating the Trust
When it comes to the cost of creating the trust itself, you have a couple of options. You can purchase the necessary paperwork from an online document provider or you can enlist the help of a lawyer. The cost of a lawyer will vary depending on where you live -- attorneys in metropolitan areas tend to charge more than those in rural locations -- as well as the complexity of your estate and whether you’re married and want a joint trust. If you just want a basic trust, it will cost less than if you want to safeguard against a spend thrift heir who might whip through his entire inheritance in six weeks. You can prevent such eventualities, but your documents must include the correct language and this may necessitate the help of a professional. If you hire a lawyer to draft your trust, plan on spending at least $750 if your estate is very basic and uncomplicated and a minimum of about $2,000 if it is not.
Funding the Trust
A trust is a useless, empty entity unless it’s funded, which means you’ve transferred ownership of your property from yourself into the trust. Some of your property will probably require special conveyances. For example, if you own real estate, funding your trust requires creating new deeds for each piece of property. Some attorneys will include these additional costs in their flat fees for preparing your trust, but others will not. If you’re thinking of using a lawyer, ask upfront what the fee includes so you’re not unpleasantly surprised later.
A comprehensive estate plan covers myriad contingencies, so you might not want to just create your trust and fund it, then leave it at that. A pour-over will catches property you’ve neglected to transfer to your trust and it directs it into your trust at your death. You’ll also need a will if you have minor children and want to name a guardian for them, and you can include this provision in a pour-over will as well. Although a trust can take care of your personal business if you become incapacitated, it won’t include provisions for your personal needs in this event so you might want to give someone power of attorney for healthcare decisions. These extra documents may cost additional money, although some attorneys include pour-over wills and powers of attorney in their fees for trusts.
Living trusts fall into two categories: revocable and irrevocable. If you form a revocable trust, you can manage it and its property during your lifetime, and you can name a successor trustee to take over for you in the event of your death or incapacitation. If you form an irrevocable trust, you must appoint someone else to run the trust for you and he will probably expect compensation. You can ask a professional trust company to take over this task or a friend, family member or attorney. You might want to leave your successor trustee a bequest in lieu of paying for his services because if he accepts payment, it’s income and he must pay taxes on it.