What are the disadvantages of a trust?
This is what we are going to be discussing in this video. I’m Sarah Siedentopf. I’m an estate planning and probate attorney in Atlanta, Georgia, and also the author of Peace of Mind Through Estate Planning. If you’ve seen anything else by me, you know that I love trusts.
But, what are the disadvantages?
Are there any dark sides to trusts? What should you know before you make a mistake that might cost you money or cost your family headache? Now, there are a whole lot of different types of trusts, so the disadvantages of one trust might not be the same for another trust. And the first question with a trust is, is it revocable or irrevocable? If it’s irrevocable, we can’t change it. So that would be a first disadvantage. And now there are definitely certain types of things that can only be achieved by trusts that cannot be changed.
So sometimes this is necessary for the process, but it is worth keeping in mind that it’s a definite downside to have something that once you put it in place you can’t change it. For the most part, I’m actually suggesting revocable trusts, trusts we can change to clients, so that’s not an issue because you can change them.
But, what are our other possible issues?
One of those is that if you don’t put it into the trust by transferring it, taking some action to transfer it, the trust does not own it. So, a will is going to handle anything that you own in your name, and you don’t have to be specific about it. There’s gonna be a clause that says, and anything else I haven’t mentioned. A trust can talk about the house, and what you want to do with the house, but if we have not done a deed transferring the house from your name into the trust, it doesn’t matter that the trust says what to do with the house. The house isn’t owned by the trust. The trust doesn’t govern the house. So generally speaking, we do have to take extra steps to put something into a trust.
Of course, along with that is the idea of maintenance, because the house that you put in today may not be the house that you have 20 years from now. Or maybe also we’re getting vacation properties or something else that we want to put in the trust, and if you forget to do that, move and just don’t put the new property into the trust, it’s not there. So, there is some maintenance involved with a trust. Additionally, of course, both with the upfront and with the maintenance, there tends to be higher fees.
So it does cost more money to put together a trust and do deeds putting property into the trust as you move through life. So that would definitely be considered a downside. On the other hand, of course, there are a lot of fees and costs associated with not having your assets in a trust and having to go through probate and other things like that. But those are going to be our big potential downsides, disadvantages, to a trust. And certainly, along those lines, I have had many people come into the office with trusts.
Sometimes, they’re still alive.
Maybe they moved and they wanna know if this trust from another state is valid in Georgia. And other times, someone has actually passed away, and we want to know, what do we do about this trust? And, as I dig into it, the question rises, what’s actually in this trust? Was anything ever transferred into this trust? And almost, I hate to say every time, but almost every time, there is nothing in the trust. So somebody thought they had a trust, they did have a trust, but they thought they were getting the benefits of the trust, and they weren’t. So, that is definitely a downside.
If you don’t understand what you have to do put things into your trust and what you have actually put into your trust, there’s a good chance that you didn’t do it right and for all intents and purposes, you don’t have the benefits of a trust. So, definitely a disadvantage. Of course, if you do it right and get good advice, that’s easily overcome.