Disadvantages of a Trust
The main disadvantage to creating a trust is that it takes you quite a bit of time to get organized and make the decisions needed. It is also more expensive to create a trust than it is to create a will. However, if you understand the rules, are organized, and have made all of the necessary decisions, the cost of creating a trust will be substantially reduced, and it will save your family money after your death.
Time and Expense
The reason it is more expensive and time-consuming to create a trust than a will is because you need to transfer ownership of each piece of property from your own name to your name as the trustee of the trust. Earlier, it was recommended that you begin the planning process by purchasing a three-ring binder or notebook. Take a look at how many different sheets of paper you have, describing each individual piece of property. By flipping through your notebook, you can evaluate how complicated or expensive it will be to transfer ownership of your property to your trust. However, you may be pleasantly surprised to discover that you can transfer ownership of most of your property without the help of a lawyer and, possibly, without fees.
Be sure to check your state law, or the law of the state where you own property, to determine whether there is a real estate transfer fee for retitling.
On each of those separate pieces of paper, which describe every piece of property you own, you should write the following questions: “How do I transfer title to this piece of property?” “Is there a cost to do so?”
Transferring Real Estate
If you own real estate, you need a deed to transfer the real estate from your name, or from joint name, to your name as trustee of your trust. It is highly recommended that you not try to prepare your own deed — there are too many ways you can make a mistake.
If you have a copy of your current deed, unless there is something complicated or unusual about your real estate, it should not cost a large sum to have a lawyer prepare a new deed to transfer the real estate to your name as trustee of your trust. The only change in the deed is the title.
Transferring Bank Accounts
Most of your bank accounts can be changed into your name as trustee by completing a form with the bank. Sometimes the bank will require that you close the existing account and open a new one in your name as trustee of your trust. This may mean a visit to your bank, but it is not something you need to hire a lawyer to do. The bank may also require a copy of your trust document.
If you understand what a trust is and have made the necessary decisions, it should not take your lawyer much more time to prepare a trust document than it would take him to prepare a will. And it may save your family time, money, and hassle to have a trust in place. Remember that the fewer questions the lawyer has to ask you, the less time and expense it will take to create a will or trust.
Transferring Stock Shares
If you own shares of stock in your individual name in certificate form, it may be almost impossible to change the name on those certificates.
If you have a brokerage account, ask if you can change the name on the account to your name as trustee of your trust. You may have to open a new brokerage account in your name as trustee. Though time-consuming, it isn't a difficult task.
Some brokerage firms will complete the paperwork to transfer the individual shares and certificates from your name to your new brokerage account free of charge.
Transferring Life Insurance, Annuities, and Retirement Accounts
If you own life insurance or annuities or have retirement accounts, you are going to need to understand the rules about each of these individual investments before you decide whether you want your trust to be the beneficiary or owner of these types of assets. Each asset is covered in a later chapter.
Even though it takes time to transfer your assets to your name as trustee of your trust, imagine how expensive it would be for your survivors to transfer title after you are gone. Furthermore, if your property was in your name and you have no will or trust, your loved ones would have to pay a lawyer to obtain the approval of the probate court to make the transfers after you are gone.