- Around 67% of all United States citizens don’t have a particular estate plan, such as a living trust!
- After experiencing the impact of inflation, 1 in 4 Americans plans to devise and implement a living trust.
- We can see the importance of a living trust in adequately managing and distributing assets.
- A living trust arrangement includes many costs, such as an attorney, court, trustee, maintenance, appraisals, or tax fees.
- A living trust is more expensive than a will but can be much more efficient and affordable than probate procedures.
- There are many options, such as DIY living trust kits, negotiations, certified lawyer referrals, and others, to reduce living trust costs.
A living trust is a legal arrangement that should be a regular part of everybody’s living plans. It can help you properly manage your assets during your lifetime and even beyond! However, the first question people ask when considering it is, “How much does a living-trust cost?”
There’s no definite answer to that question because living trusts can include classes of costs of different natures. For example, this legal arrangement can include courts, attorneys, trustees, fillings, and assets’ fees. The complexity of the state, the number of assets and types, and advisory fees can also add up to the total cost. Nevertheless, a living trust helps you avoid costs and additional probate delays.
Check out how we’ve broke the living trusts’ price structure and how you can slash some of its costs!
Introduction to a Living Trust
After the Covid-19 Pandemic and the increased inflation, 1 in 4 United States citizens is considering estate planning and living trusts. People still ask themselves, “How much does it cost to set up a living trust?” and 67% don’t have a particular estate plan. Nonetheless, we must first define what estate planning and living trusts are to set up a cost-efficient one!
Definition of a Living Trust
A living trust is a legal arrangement you use in estate planning to regulate the usage and distribution of your assets. This legal arrangement can help you manage your estate during your lifetime and after. It consists of multiple fees, and the cost of trust depends on the complexity, location, number, and types of assets. That’s the reason for the four main types of trusts: living, testamentary, revocable, and irrevocable.
Importance of Setting up a Living Trust
You can see the importance of setting up a living trust in assets management and distribution in cases of disease, illness, or accident. Furthermore, this legal arrangement will secure you a third party that will guarantee the protection of your assets and properties.
A Brief Overview of the Costs for Setting up a Living Trust
To understand the cost of a trust, we need to divide it into three subcategories. Here’s their brief overview: basic costs (attorney, court, trustee, and asset transfer fees), other factors (complexity of the estate, number and types of assets, and location), and additional costs.
Basic Costs of Setting up a Living Trust
You’ll find the answer to your question, “How much does a living trust cost?” in the attorney, court, trustee, asset transfer, and filing fees. A legal person will include all of these fees in the legal arrangement as a part of the devising and implementing of the assets’ plan.
Attorney Fees
The attorney fees are a crucial element of the cost of setting up a trust. For example, an attorney will design your living trust and ensure that you comply with federal laws and those of the particular state. The attorney fees for a will or a trust are $400 to $700 and $1.500 to $2.500, respectively.
Court Fees
A living trust is a better option than a will because it distributes your assets to relatives and associates rightfully and beforehand. The cost of living trust vs. will is thus higher because of court fees for eventual probation and distribution of the estate. It means you’ll have to pay the court fees, ranging between 1% to 5% of the worth of the assets for distribution and final assessment.
Filing Fees
The cost of living trust also includes transferring assets to a particular type of living trust. You can place multiple asset types into your living trusts – from cash and securities to insurance and real estate. Each has a “filling” or an “asset transfer” fee!
Trustee Fees
The trustees are the attorneys, officials, agencies, or other persons guaranteeing the safety and security of managing your assets. The trustee fee is usually 1% to 1.5% of the estate’s worth or a percent annually.
Factors That Affect the Cost of Setting up a Living Trust
Other factors can also have an impact on the living trust cost. They’re usually associated with the characteristics of the assets, such as the location, complexity, number, and type. Following’s a brief elaboration on the four main factors and how they can determine the overall cost of living trust.
The Complexity of the Estate
Naturally, the complexity of the estate is the number one factor in answering our question, how much does a living trust cost? Attorneys and trustees calculate the average costs based on the size and assets of the estate. Moreover, they consider the various asset types and how to combine them into a single portfolio. On top of that, attorneys also take into account your marital position. Individual rates are often more affordable than rates for married pairs.
Number and Type of Assets
Your living trust portfolio can include different asset types, such as cash, securities, real estate, and various insurances. Each asset type has different living trust rates that can also affect each other when combined into a single portfolio. The average cost of will and trust ranges between 1% and 5% of the assets’ worth- based on the number of assets, their types, and combined rates.
Geographic Location
Another factor is the geographic location or the State and particular area in which your estate is located. Additionally, various states have different laws which will further increase the attorney or corporate trustee fees.
Attorney’s Experience and Reputation
An experienced and well-known attorney can charge you double the fees of an inexperienced one. However, you can expect these experienced attorneys to manage and distribute your assets efficiently.
Additional Costs of Setting up a Living Trust
The living trust cost includes some additional fees that can significantly increase the overall cost of trust. More frequent additional costs are maintenance, tax preparation, appraisals, investment advisory, and updating-trust fees.
Maintenance Fees
All living trusts have maintenance fees, especially the irrevocable and testamentary ones. Trustees calculate the maintenance fees as a percentage of the estate’s worth and a percentage of the income generated by the particular assets. For example, revocable living trusts can sometimes induce maintenance fees of more than 2% of the assets’ worth.
Tax Preparation Fees
Depending on the generated tax income, holders of living trusts, especially revocable martial living trusts, must file a tax return. Across the United States, this is usually active for an income of $600 or more in a single tax year. Moreover, you may have to pay “gift” taxes for every transfer from a revocable to an irrevocable living trust.
Appraisals and Investment Advisory Fees
Trustees must evaluate your assets and advise you on to decrease the cost of setting up a trust and tailor a smart and profitable portfolio. These fees are usually charged by the trustee or the attorney that calculates it in the overall cost of providing you with a living trust.
Fees for Updating the Trust
Depending on the experience of the trustees and the modification type, there are specific fees for updating the living trust. The trust and will pricing for updates can significantly vary depending on the depth and number of the changes, the complexity, the number of living trusts, and whether the attorney is the initial or a new one.
Ways to Reduce the Cost of Setting up a Living Trust
A living trust is a legal arrangement that can include multiple assets and roles, such as attorneys, trustees, cash accounts, non-retirement accounts, stocks and bonds, life insurance, and more. You can combine and reduce their rates and fees to slash the overall cost of living trust.
DIY Living Trust Kits
Across the online world, numerous DIY living trust kits can help you tailor your living trust in compliance with the state’s active laws and regulations. The most popular DIY living trust kits are the revocable living trusts, and you can order them at a price ranging between $20 and $40. You can significantly decrease the overall setting cost for attorneys and trustees with a DIY living trust kit.
Hiring a Paralegal instead of an Attorney
You can always hire a paralegal to advise you and prepare your living trust. Paralegals are here to provide operative and administrative support to legal attorneys. Their hourly wages are lower than those of attorneys, which can sometimes go up to $200 to $400 hourly.
Negotiating Fees with an Attorney
If you’re asking yourself, “How much does a living trust cost?” always beware that there’s a negotiation option. You can negotiate with the complexity, the rates, and the fees with the attorney and try to find common ground for a win-win arrangement.
Using a Lawyer Referral Service
For example, a Certified Lawyer Referral Service can cost you between $20 to $25 in California, while in Washington, the fee can range between $10 and $45. In any case, this is a far more affordable option than going with the standard trust and will pricing method.
Comparison of Living Trust Costs to Other Estate Planning Options
Agencies design the living trust as a legal arrangement to provide clients and citizens with a more beneficial asset management experience than wills and court probates. The aim is to overcome all the delays and administrative labyrinths of probate procedures and rules.
Comparison to Wills
The main difference between wills and living trusts is in the period of managing and distributing the assets. The will focuses on disturbing the assets after death, while the living trusts treat the assets and estate during your whole life span and beyond. That’s why wills are cheaper than a living trust cost. For instance, an attorney fee for a will can vary between $400 and $700 depending on the attorney’s experience and state laws, while the living trust ranges between $1.500 and $2000.
However, simpler living trusts can cost as low as $600 per arrangement. It means that the trusts’ complexity and the number of assets can also make a living trust more affordable, concerning the increased number of insurance options. Additionally, living trusts don’t induce probate and documentation costs that will have and can go up to %3 to %7 of the estate’s worth.
Comparison to Probate
According to various statistics, probate in the United States can cost somewhere between %3 and %7 of the estate’s worth. Moreover, the probate is time-consuming and can take you up to 9 months depending on the state’s active laws, the number of creditors, contesters, witnesses, and notarization costs. Probate is less efficient and more costly than a living trust.
Conclusion
As we’ve seen, there’s no definite answer to our question, “How much does a living trust cost?”. The average cost of a will or a trust is based on the attorney, trustee, transfer, maintenance, and other fees. Moreover, you can calculate how much does it cost to set up a trust depending on the complexity, location, number, and type of assets.
However, you can reduce the payments through multiple methods, such as ordering a DIY revocable living trust kit, negotiations, and lawyer referral services. How much does a trust cost depends on all these factors combined in a single portfolio with specific rates and fees.
Lastly, although living trust can be more expensive than wills and probate procedures, they regulate your asset distribution and management both during and after your life.
