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Why Living Trusts Are Not Always The Best Estate Solution

At Buffington Law Firm, trust dispute attorneys are frequently tasked with the job of solving problems involving California living trusts (also known as “revocable” living trusts). In recent decades trusts have become wildly popular in California such that trusts have largely replaced wills as the preferred method for transferring estates to the next generation.

Attorneys often present trusts to clients as an undisputed superior method of estate planning. Sometimes this can be true. Trusts can be a quick and easy way to handle estates. But not always, for several reasons.

1.  Trusts Involve Costs Too, Even If They Avoid Probate. Most people believe that trusts are superior to wills because they “avoid probate.” It is true that trusts are designed to be administered by one or more successor-trustees after the original trustor (the person who created the trust and the estate) passes on.  This can indeed avoid the need for probate, which costs money and takes time and usually must be handled by an attorney.

However, trusts can entail legal costs too – sometimes higher costs than in a probate. Successor-trustees usually know very little about trust law, and they often find it necessary and advantageous to retain legal counsel. Not all families are blessed with siblings who harmoniously “get along” and the successor-trustee often feels the need to retain legal counsel if for no other reason than to avoid trouble and know how to go about distributing the assets and so forth. This legal counsel is generally paid out of the trust, i.e., by the beneficiaries. There is no guaranty that this is cheaper than a probate.

2.  Trustee Fees can be Substantial or Abusive. When a successor-trustee retains counsel, that counsel represents the successor-trustee, not the beneficiaries. The trustee’s legal counsel often advises the trustee that it is proper to take a trustee fee. This fee is often based upon the size of the trust estate.  Since the trustee hired the lawyer that is advising the trustee as to the amount of trustee fees that the trustee can take, it does not require a vivid imagination to perceive a possible conflict of interests. Our trust dispute attorneys have repeatedly dealt with situations involving trustees “milking” the trust for high trustee fees in a manner requiring Court intervention.

3.  Trusts Often Involve Additional Costs. Often the creator of the trust fail to transfer their assets into the trust while they are alive. This creates a whole host of problems. Often it is disputed whether the trustor intended for a certain asset to be an asset of the trust. This problem occurs frequently in the context of bank accounts, which trustors sometimes hold personally and in common with another person – which other person may claim the account after the trustor’s death. Other times real property assets are held by the trustor and another person in joint tenancy. This can lead to litigation when the trust beneficiaries believe that these assets were intended to be trust assets. Trusts are not a panacea for all problems of this kind.

4.  Trustees Sometime Misbehave and Fail to Carry Out the Terms of the Trust. Our trust litigation attorneys have frequently dealt with situations where a successor-trustee simply is not carrying out the terms of the trust. Sometimes the trustee favors one beneficiary over another. Sometimes a trustee mishandles trust assets, uses trust assets for his or her benefit in violation of the terms of the trust. When this happens, the beneficiaries require legal counsel. It is sometimes necessary to remove a problem trustee through court action or obtain a Court Order instructing a trustee on a particular asset or transaction.

If you are faced with a situation involving a problem with a California living trust, we invite you to telephone us for a free legal consultation. All consultations are with an experienced trust litigation attorney, are completely confidential and protected by attorney-client privilege, and there is never any obligation.