I have previously discussed that 99% of the population does not need a Living Trust. The reality is that the concept of a Living Trust is mostly a marketing scheme by lawyers who attempt to scare seniors with three words: death, taxes, and probate. Moreover, Living Trusts do not even offer their claimed advantages. See https://marylandprobatelawfirm.com/wills-trusts/
Living Trusts are often promoted as allowing for the immediate succession of the control over assets. The Living Trust will have a paragraph that allows the original Trustee (creator of the Living Trust) to resign and for the successor Trustee to take over. However, such a resignation letter will not be honored by financial institutions. Banks and brokerage firms require that the original Trustee execute their own form before a notary to resign as Trustee and to appoint a successor Trustee. This is problematic if the original Trustee is hospitalized, is no longer competent, or has been quarantined. Even after the form has been fully executed, it can take several weeks for the financial institution to process the form.
Another problem with Living Trusts is that attorneys often instruct their clients to name the Living Trust as the beneficiary of IRAs, 401(k) accounts, and even life insurance policies. If the Living Trust is named as a beneficiary of an IRA or a 401(k) account, all of the advantages of an inherited retirement account are lost. There is no advantage of naming the Living Trust as a beneficiary of a life insurance policy.
Another problem that I have encountered is that clients often have multiple Living Trusts. The clients erroneously believe that their most recent Living Trust is controlling. However, the long forgotten Living Trust will be controlling if assets are still titled in the name of the old Living Trust and/or if the old Living Trust is named as a beneficiary of retirement accounts or life insurance policies. The problem is further complicated when the successor trustee of the old Living Trust is deceased.
