Expense

• While a common belief is that a living trust can reduce the costs involved with the probate of a will, the fact is that forms and court filing fees for a living trust can be similar to those incurred when a will is used to transfer assets. An exception would be if the legal fees paid on a living trust are related solely to the percentage of estate assets and not the more commonly accepted practice of billed hours by an attorney. In addition, an knowledgeable attorney must be retained to set up the trust and successfully transfer title to all assets in the trust, including those that are acquired in the future. It is important that the transfer is done correctly, because if all assets aren't owned by the living trust in the event of death, those outstanding assets will become subject to probate and more legal fees will be incurred. The costs of initializing and managing a living trust can typically amount to up to $2000 or more over the costs of a traditional will.
  
  

Third Party Reluctance

• A court of law will issue a letters testamentary in the case of a will with probate. This is a well-recognized, formal document that authorizes an executor to carry out your wishes according to your will. Third parties involved, such as creditors or lenders, may be reluctant to accept a trustee of a living trust as the authority in such matters. This could make it difficult for the trustee to manage the assets.
  
  

Federal Estate Taxes

• A living trust becomes irrevocable upon death and, if distributions are made, the trustee can become liable for federal estate taxes that are due on the deceased's behalf. A living trust does nothing to diminish the costs of federal estate taxes. The amount of federal estate taxes owed can prove staggering to the trustee. One way the trustee can possibly avoid this is to apply for a release from the Internal Revenue Service, which can absolve him of liability.
  
  

Confidentiality

• Even though you may opt for a living trust to protect your confidentiality and avoid making your assets a source of public knowledge, the trust can still become public if it is contested or disputed by beneficiaries. Also, if you have a will that has a pour-over provision that affects your living trust, the court may require that the living trust be recorded as a matter of public record.