Prepared by the Idaho State Bar
Taxation, Probate & Trust Law Section
(REV2013-04)
For referral to a lawyer or more
copies of this brochure contact:
Idaho State Bar
PO Box 895
Boise, Idaho 83701
Phone: (208) 334-4500
ww.isb.idaho.gov
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Everyone Should Have a Living Trust
False The costs of creating and administering living trusts outweigh the
benefi ts for many Idahoans. For a few, the living trust is a useful device to
obtain asset management. These individuals lack the capacity to manage
their assets, or have lost that ability through ill health. They name family
members or corporate trustees (typically banks) to provide administration
through a living trust. For others who own real property outside of Idaho, the
living trust can be a useful tool to avoid that state’s probate process.
The Living Trust is the Only Way to Avoid Probate
False If your goal is to avoid probate, there are several other ways to do
so: Pay on death (POD) accounts, transfer on death (TOD) designations of
securities and joint tenancy on real property are common and inexpensive
methods of avoiding probate. However, if your estate, or the combined estate
of a married couple, may exceed $5.25 million, you should consult your tax
advisor or attorney before using these methods.
False and misleading statements about living trusts are
commonly made through:
1. Free Seminars and workshops
2. Advertisements
3. Telemarketing and mail solicitations
4. Door-to-door sales
It is very di cult to get your money back after you’ve paid for
the living trust. Before you make a commitment at a seminar or
before you allow a salesperson in your home, remember:
• Always take suffi cient time to make your decision.
• Legitimate advisors understand when you want more information about their
offer or their company.
• Be sure to talk with someone knowledgeable whose advice you value when
considering a trust. Contact your accountant, attorney, banker, or fi nancial
advisor.
• Never sign a document you don’t thoroughly understand.
• Avoid buying on impulse or succumbing to sales pressure to “act now.”
• If you conclude that a trust may be right for you, we recommend that you
deal directly with a licensed Idaho attorney who has substantial expertise in
estate planning.
Tips to Avoid Fraud
What You Can Do to Protect Yourself
Living
Trust?
Do You Really Need a
Each year Idahoans lose thousands of dollars through the purchase of unnecessary
living trusts. Often, families face potentially greater costs after a death from dealing
with problems caused by the trusts than if there had been no trust.
A living trust is an arrangement to hold your property and assets in trust while you
are living, with directives for the disposition of the property at your death. The person
establishing the living trusts frequently acts as his or her own trustee. Living trusts go
by many other names, including, “Loving Trusts,” “Family Trusts,” “Revocable Living
Trusts,” and “Intervivos Revocable Trusts.”
There are some situations when a living trust is appropriate. However, the living
trust is being sold and promoted for use by people in situations where it serves no
useful purpose, or by people whose purpose could be achieved by far less expensive
means. Protect yourself from abuse by following these guidelines:
Living Trust Sales are a Growing Area of
Consumer Fraud
Protect Yourself
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Consult with an attorney who is not involved in promoting living trusts to see
if it would be appropriate for you.
Take time to make your decision. If you are being pressured to “act
immediately,” talk to someone else.
If you conclude that a trust may be right for you, have it prepared by a
licensed Idaho attorney who has substantial expertise in estate planning.
Be wary of living trusts being promoted or sold in conjunction with “free”
seminars.
The sales of living trusts are often promoted by false or incomplete statements about
the probate process, guardianships, and the taxation of estates. Such statements
include the following:
Fraudulent and Misleading Statements
Sometimes Promote Living Trusts
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Your Estate Can Be Destroyed by the Death Tax
MISLEADING Most Idaho estates will face no death taxation at all. In 2013
the federal estate tax affects those who have taxable estates more than $5.25
million in value which are transferred to someone other than a spouse or charity.
Only the taxable portion of the estates over $5.25 million in value pay federal and
state estate taxes at the maximum rate of 40 percent. The 2013 exemption from
the Federal estate tax of $5.25 million is intended infl ation for years after 2013.
Idaho does not presently have a separate estate tax.
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Living Trusts Save Taxes
MISLEADING A revocable living trust saves no more estate taxes than a
properly drafted will with testamentary trust provisions.
Living Trusts Help you Avoid Contested Wills
MISLEADING Because a “trust” and a “will” are separate legal concepts,
a trust is not subject to a will contest. However, trusts are subject to attack on
the basis of lack of capacity, undue infl uence, and fraud, which are the same
grounds used to contest a will.
Living Trusts Help You Avoid Your Creditors
FALSE During your lifetime, assets in a living trust are subject to the claims of
your creditors. After your death, these assets are subject to the claims of your
estate’s creditors.
Assets in a Living Trust Don’t Count for Medicaid Eligibility
FALSE Any assets that can be applied to your support are counted toward
Medicaid eligibility. Because the revocable trust gives you the right to withdraw
its assets for any purpose, including your own support, they are considered in
determining Medicaid eligibility. Therefore, a living trust is not an asset protection
or Medicaid planning tool. The assets in the revocable living trust are also subject
to the Medicaid recoupment lien after the surviving spouse dies. In addition,
while the home is generally excluded for Medicaid eligibility purposes, the home
loses its exempt status when titled in the name of the trustee of the living trust.
This can create complexities when applying for Medicaid. Only assets in certain
irrevocable trusts may be excluded in determining Medicaid eligibility 60 months
after the assets are transferred to the trust.
Living Trusts Avoid the Expense of a Conservatorship
MISLEADING If you become disabled, a living trust may avoid the cost of a
conservatorship in some circumstances, but not in others.
Attorneys Charge from 3% to 10% or More to Probate Your Estate
FALSE If your family wishes to hire the services of an attorney to assist with a
probate, your family will agree upon the attorney’s fee. That fee should be based
on an hourly charge. In Idaho, unless there are unusual problems or disputes
among heirs, the total fee should be generally less than three percent of the
value of the estate.
Probate Takes Years to Complete
MISLEADING AND VERY UNLIKELY There are ra�e circumstances
where families and others clash for an extended period after death. Such
disputes can cause delays in the administration of either a will or a living trust.
In other circumstances disputes with the Internal Revenue Service can cause
delays. However, in most circumstances the administration of a living trust is no
more expeditious than the administration of a will in probate.
Probate Requires Court Hearings
FALSE Idaho provides a simplifi ed probate process under the Uniform Probate
Code. These informal procedures, which account for most Idaho probates, involve
no court hearing and may not require the fi ling of an inventory for the estate.
Unfortunately, some states, including California, have not adopted the Uniform
Probate Code. Thus, some of the criticisms of cost and delay are based on the
probate procedures of other states, not those of Idaho.
