Sometimes Wills Are Better Than Living Trusts
As so often is the case when I write about estate planning, my column a few weeks ago about living trusts led to a barrage of letters. Besides the many letters from legal consumers, two lawyers were concerned that readers might think living trusts are for everybody--even though I described some of the disadvantages of this probate-avoidance technique.
One advantage of using a will and going though probate, which you don’t have when you rely exclusively on a living trust, is a four-month statute of limitations on creditors’ claims, according to Santa Barbara attorney C. Brian O’Gorman.
All claims against the deceased, whether for services rendered, fraud or property damage, must all be filed within a specific four-month period, O’Gorman explains. The period begins when the court gives the executor his authority to act on the estate’s behalf, usually when the will is admitted to probate, he says.
In fact, O’Gorman says he has had clients who decided not to use a living trust and used a will instead, feeling better knowing that all possible unknown liabilities were barred by a specific date following death.
“It’s a form of insurance you can’t buy any other way,” he says.
O’Gorman also observes that probate does not have to be as expensive as it sounds.
“The fees of the attorney and the personal representative are not fixed by law,” he writes. “Rather, there are statutes which fix the maximum amount which may be charged, absent an explanation why a greater fee should be allowed. All attorney fees are negotiable, even probate fees, and you would do your readers a service to tell them that. Similarly, executors’ fees are negotiable, even when dealing with banks and other professional fiduciaries.”
That’s a very important point and one I skipped over in my recent column. The fees set by statute are the upper limit, and you should try to negotiate for less. Unfortunately, often the maximum rate becomes the customary one, simply because clients don’t negotiate and lawyers charge what they can get.
Los Angeles attorney David E. Burton shares the reluctance of leaping head-first into a living trust:
“Just as an unnecessary operation can be fatal to your health, a living trust in the wrong situation can be fatal to your pocketbook,” he writes. He recommends that a person consider using a living trust only if his or her estate exceeds $600,000 or someone other than a surviving spouse is inheriting part of the estate (because community property passing between husband and wife is not subject to probate).
