I recently read an article that posed the question whether you should put your home in a living trust. The author did not like probate. If you from a larger city, I don’t blame her: Probate proceedings in different states with larger populations can get expensive and lengthy (Relatively, Colorado is a much cheaper state to probate a Will). Instead, the author recommended a living trust, but suggested the price tag would be at least $1,500 to $3,000. That does not include maintenance or guidance execution. These numbers are not unlike the market rates you will see here in the Western Slope. For example, an estate firm in Grand Junction lists their flat fees on their website, and they charge $1,500 for a nontaxable estate plan person with a trust. I assume by nontaxable, they mean an estate less than $5.4 million. If it is taxable, the charge is $2,500. Many firms do not do flat rates and charge an hourly, because every estate plan is different and hard to estimate. It is likely though the total charge for any living trust may exceed $2,000. The reason? They are complicated to draft with conditions specific to your estate plan and assets need to be transferred and maintained, which includes other legal documents. You also need a trustee and the ability to manage it every year. If the trust generates income, you need a tax accountant that is familiar with fiduciary returns.
In contrast, a Will may be less than $1,000. Some attorneys can do one for a couple hundred dollars for a simple Will. Once it is drafted, it is done–you do not need to look at it again unless you have a significant life event may effect the Will. With a Will, the amount you pay for a trust is about the same or more you might pay to probate the Will for a simple estate. Therefore, there is not a savings to do a living trust for smaller estates. But why do that when there are other ways to avoid it altogether and potentially save money? That is why you should consider a beneficiary deed with your estate plan as an alternative.
A beneficiary deed operates much like a payable on death designation you might have on your checking account or life insurance policy. The beneficiaries are listed on the deed, but they do not own the property until death. You can revoke it any time or sell the property without the beneficiary’s consent. Upon death, it will automatically transfer the house to your beneficiaries upon recording the death certificate. Is there a downside? A couple, depending on your situation. Because it is an incomplete gift, Medicaid eligibility is an issue (I am referring to Medicaid for Long Term Care Assistance, not Medicare). They wont allow you to keep the beneficiary deed, and they will ask you to revoke it before applying or they will deny your application. If Medicaid is part of your estate plan, a beneficiary deed will not work.
There are a couple other downsides: a Beneficiary Deed does not include conditions or contingencies. Do you want to give your home to your children but only until they graduate college or turn a certain age? Do you own multiple properties in different states and want them managed properly after death? Do you have children on disability or public assistance, which might be jeopardized if they receive an inheritance? If the answer is yes to any of these questions, then a trust or a Will with a testamentary trust might be a better option for you.
If you are considering these options or want more information regarding your estate plan, please contact the grand junction estate attorneys at Reams & Reams. We are available to assist completing or even modifying your estate plan.