Most people have a general idea of what a Last Will and Testament is and the purpose it serves. However, if you mention establishing a Living Trust, many people will look at you quizzically with no idea what you’re referring to, or they’ll mistakenly claim that a Living Trust is reserved for “rich people.” This is not the case. In fact, there are many misconceptions surrounding Living Trusts. Below are some of the most common myths about Living Trusts and important facts you need to know.
Myth No. 1 – I Don’t Need a Trust Because I am Not Wealthy
This is, by far, the most common misconception surrounding trusts – they are only worthwhile for people who are wealthy. Not so. The benefits of having a revocable living trust in an estate plan are plentiful and may actually wind up costing you less than the traditional Last Will and Testament. How? Well, the costs associated with probate and court conservatorships/guardianships (which a living trust can avoid) may actually wind up taking a higher percentage from estates of smaller size than simply administering your estate through a trust. There is also the added benefit of being able to manage an estate privately without forcing your family to deal with a court. Actually, creating a trust based plan can have a greater impact for smaller estates. Typical example is if there is a stroke, dementia, Alzheimer’s then the long term care expenses will erode the estate completely if you have not done proper planning ahead of time.
Myth No. 2 – Living Trusts are Costly to Create
Compared to what? If you or a family member incur a long term care health issue your costs could be hundreds of thousands of dollars without proper planning. A well-counseled and detailed living trust may have a higher upfront cost when compared to drafting a cookie-cutter Will but over the life of the plan we have found the costs overall are consistently lower than doing very little up front and letting the chips fall where they may. It is important to spend a little extra time up front to think through common challenges that aging people face and preparing for these issues in advance (long term care, navigating health care options, navigating living options, which resources are suitable for you, asset protection for the spouse or family, etc.). You are paying for a plan not just documents. Assets also need to be titled properly in advance to assure a smooth transition. Word processed documents alone don’t achieve this goal. When you factor in probate costs, the costs of a conservatorship if you become incapacitated and the costs of a guardianship if you leave assets to a minor child, the costs associated with a Will can actually wind up being much higher than the costs associated with established a trust.
Myth No. 3 – Creating a Trust Means Losing Control Over My Property
If you are your own trustee, you will be able to do anything with your assets that you could do before they were transferred into the trust. This means you can buy or sell property, change your trust or even cancel the trust entirely. If you decide to name a third party to manage the trust as trustee, you retain the right to replace the trustee while you are alive and you can transfer that authority to a beneficiary when you pass on. if you are not satisfied.
Myth No. 4 – It is Expensive to Hire a Trustee
As long as you are your own trustee, you do not pay fees for management of the trust. Successor trustees are entitled to receive a fee, but family members often forego receiving a fee. If you choose a professional trustee, they will only charge a fee when they start to act on your behalf. Furthermore, a professional trustee usually only charges a small percentage that is paid through the trust assets.
Speak to an Estate Planning Lawyer Today
As you can see, there are many myths and inaccuracies associated with living trusts. If you are interested in creating an estate plan, you should consider incorporating a detailed trust into your plan. To learn more, reach out to InSight Law today.