Setting up a Trust-based estate plan can be a great way to ensure that your assets are protected and distributed according to your wishes. However, it is important to note that there are some downsides to this type of estate planning that should be considered before making a decision.
One of the main downsides of setting up a Trust-based estate plan is that it does require you to take some action. To the extent you set up a trust, you have to take action, sign documents, and deal with institutions during funding. This can be a difficult and time-consuming process, especially if you are not familiar with the legal and financial aspects of Trusts.
Another downside of Trust-based estate planning is the potential of overfunding an asset protection trust. This can happen if you put too much of your assets into the irrevocable Trust, which can limit your ability to access them if you need them in the future. Additionally, there may be some difficulties with mortgage companies when it comes to Trust-based asset protection. They may not be familiar with this type of arrangement and may not be as willing to work with you.
Trust-based estate planning also involves a learning curve that comes with shifting your mindset in dealing with how your assets are titled. This can be a difficult process, especially if you are not familiar with the legal and financial aspects of Trusts. It is also important to teach your family or legatees about how a Trust works. They should understand that you have a different type of arrangement and help them identify attorneys who are qualified to assist with this type of planning.
Some attorneys may also be trust-averse because they simply haven't taken the time to learn the subject matter and don't feel comfortable. Additionally, they may have a financial incentive in generating additional revenue administering a Will through the probate process.
In conclusion, Trust-based estate planning can be a great way to protect your assets and ensure that they are distributed according to your wishes. However, it is important to consider the downsides of this type of estate planning before making a decision. It does require you to take some action, and there may be some difficulties dealing with institutions during funding, and potential of overfunding an asset protection trust, difficulties with mortgage companies and a learning curve as you shift your mindset in dealing with how your assets are titled. It's important to understand the importance of teaching your family or legatees about how a Trust works, and to help them identify attorneys who are qualified to assist with this type of planning. Some attorneys may be trust averse because they simply haven't taken the time to learn the subject matter and don't feel comfortable or have a financial incentive in generating additional revenue administering a Will through the probate process.
