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Law Offices of Ronald W. Rutz
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July 10, 2000: Living Trust Myths

Q: I just read in your newspaper a Q and A by your real estate columnist that attorneys are "not required to distribute trust assets…(so) that's why many attorneys hate living trusts."

A: This is one of the many living trust myths that seem to have a life of their own, maybe because they are mentioned so often at seminars or even seen in print, as in this case.

First, attorneys do not "hate" living trusts. In my own case when I do estate planning for clients in certain states, I always do a living trust. Here in Colorado, even for very, very large estates, a will works just fine. And that is because of our probate system in Colorado as opposed to other states. Thus, so-called "blind hatred" by the legal community of living trusts has nothing to do with a lawyer choosing to one or the other. In fact, even in Colorado I do write living trusts too.

But let's look at the mechanics behind the columnist's statement. In Colorado a personal representative can act without an attorney, even in the distribution of estate assets. But whether it is a personal representative through an estate, or a trustee through a trust, a wise fiduciary should consider relying on someone with legal experience to be certain, for example, that asset titles, deeds, certificates, etc., are properly conveyed from either the estate or the trust, that the legal provisions governing each have been properly interpreted and followed, that the details to end either the estate or the trust's legal existence have been met, that non-legal matters, such as filing estate, individual, and fiduciary tax returns, have been done, that the proper documents for either the estate or the trust have been filed with the Court, etc. I can go on but you get the idea.

Again, speaking only from my own experience in Colorado, I can make a great deal more money setting up, maintaining, and then taking living trusts apart than I can in doing Wills and then administering an estate through the Courts using unsupervised administration. And remember most of the time, even with a Will, the property is set up in joint tenancy or with beneficiary designations, thus avoiding probate. So ask yourself, as between a living trust vs. an estate with a Will and having assets in joint tenancy, which way is more likely to require more attorney time? Also, I then pose to you as a corollary to your initial point, does this mean that attorneys also must hate Wills and estates set up in joint tenancy and with beneficiary designations?

The Denver Post has recently run several articles exposing "living trust mills" (Sunday June 18, 2000 in The Wall Street Journal Sunday section) where salesman (both attorneys and non attorneys) sell these boiler plate documents which are not tailored to Colorado law and often cause problems later. Kathy Kristof in her column relates the concerns that AARP is now having and how various states consumer affairs specialists, such as those in the Michigan Attorney General's office, are becoming concerned and may take action. (This exposes yet another living trust myth that a living trust handles all one's estate planning needs and by simply having something called a living trust, everything is covered under its provisions and therefore, nothing is else needed, such as durable powers of attorney.)

So remember in this area be skeptical (even when reading my column), but just use a little common sense when seeing or hearing statements like the one that attorneys hate living trusts.

And to head off very emotional and colorful expletives from those who feel living trusts are the best thing that ever happened to mankind with the possible exception of the "big bang" that may have started everything ten to fifteen plus billion years ago, give or take a billion years here or there, yes living trusts are an option here in Colorado. Just make sure that you have considered the advantages and disadvantages from the Colorado experience. Then whichever choice you make is the right choice for you, but may not be the right choice for someone else.

And finally, no I am not advocating that if you have a living trust, that you need to chuck it and start over. But do not feel that your estate will avoid probate (another living trust myth) unless you are sure that during your lifetime all of the assets are titled in the trust. If there are assets outside the trust that are subject to probate, instead of calling me and trying to justify or rationalize your decision to get involved in a living trust, use that time and energy to transfer those probatable assets into the trust.

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