How Much Does It Cost to Set Up a Trust?
A living trust is an essential estate planning tool that helps protect your assets from taxes and probate after your death. There are various types of trusts, such as marital, bypass, and generation-skipping trusts. Depending on your personal circumstances, the cost of setting up a living trust can vary. Consulting a financial advisor can help you create a robust estate plan tailored to your needs.
What Is a Living Trust?
A living trust is an estate planning vehicle that allows you to protect and manage your assets during your lifetime. You can serve as the trustee, managing the trust, and determine who will receive your assets after your death. A significant advantage of a living trust is that it keeps your assets from undergoing public probate after your passing.
There are four primary types of trusts: living trusts, testamentary trusts, revocable trusts, and irrevocable trusts. Living trusts become effective immediately upon creation, while testamentary trusts only become effective after death.
Types of Trusts
- Living Trusts: Effective immediately upon creation.
- Testamentary Trusts: Effective after death.
- Revocable Trusts: Allow for changes to provisions.
- Irrevocable Trusts: Do not allow changes after creation.
What Can You Put in a Living Trust?
You can place almost any asset you own into a living trust, including:
- Bank Accounts: Checking, savings, money market accounts, and certificates of deposit.
- Financial Investments: Stocks, bonds, and other securities.
- Real Estate: Land and homes.
- Insurance Policies: Life insurance.
- Tangible Property: Artwork, jewelry, and furniture.
Placing your house in a living trust, for example, can help your heirs avoid probate court and estate taxes and may protect your home from creditors. However, financial experts sometimes advise against transferring certain assets, such as retirement accounts like IRAs, 401(k)s, and 403(b)s, into a trust due to potential tax implications.
Cost of Setting Up a Trust
The cost of setting up a trust varies based on several factors, including complexity, the state where you reside, and whether you choose to hire an attorney.
- Attorney Fees: Hiring an attorney to create a trust typically costs between $1,500 and $2,500. Complex trusts for wealthy individuals may cost between $5,000 and $7,000.
- Additional Costs: Drafting documents to transfer property and assets into the trust can add $350 to several thousand dollars to the overall cost.
DIY Trusts
Creating a trust yourself is a less expensive option, often costing only a few hundred dollars when using online software. However, this method carries more risk since it lacks professional oversight.
Middle Ground: Legal Review Services
For a balance between DIY and hiring an attorney, you can prepare your trust using online services like LegalZoom and then have a lawyer review it. This ensures that your trust is correctly set up without the higher cost of having a lawyer do all the work.
Bottom Line
Living trusts are a valuable estate planning tool to protect your assets and ensure your loved ones are taken care of after your death. The cost of setting up a trust will depend on your location, the complexity of the trust, and the method you choose to establish it.
Tips for Estate Planning
- Consult a Financial Advisor: A financial advisor can assist with your estate plan, ensuring it meets your needs. Use Square One Planning’s free tool to find a vetted financial advisor in your area.
- Research Estate Taxes: If you have a large estate, be aware of potential estate taxes at both federal and state levels to avoid unexpected liabilities.
By carefully planning and considering your options, you can create a living trust that protects your assets and provides for your heirs in the most efficient way possible.