Common Misconceptions About Revocable Living Trusts
When used as a part of a comprehensive estate plan, a revocable living trust is an invaluable tool. Not only will your living trust let your estate avoid probate, but it will also give you the ability to keep your estate affairs almost entirely private.
But there are several potentially damaging myths and misconceptions about living trusts that can lead people to avoid creating a living trust. If you are considering creating a revocable living trust, below are some myths of which you should be aware.
1. You give up control of your assets when you create a revocable living trust
While the trust will be the legal owner for probate purposes, you will not give up any of the control you have over your personal property. Even though the property will now be titled in the trust’s name, you control the trust. You can modify it, revoke it, or change its terms whenever you like.
2. Trusts are only for wealthy people
A well-drafted living trust will have a higher initial cost than a will, but when comparing costs, it is important to note that the cost of a will should include the costs of probate when you die, the costs of a conservatorship if you become incapacitated, and the costs of a guardianship if you leave assets to a minor child. There may be some costs associated with transferring your assets to your trust when you set it up, but oftentimes a living trust ends up being much cheaper than a will in the long run. And of course, thousands of dollars cheaper than probate.
3. I don’t have enough property for a living trust
Generally, if you own property, have life insurance and/or have other assets which total over $166,000, you are a candidate for asset protection. The type of trust you set up will vary depending on your age, general health, amount and type of assets, lifestyle, and goals.
4. The only purpose of a trust is to save estate taxes
A trust can be used to safeguard assets from estate taxes, but that is not its only purpose. In fact, people that live in California don’t have to worry about estate taxes because California does not have a “death” tax. And Federal estate taxes only apply to estates that are much larger (e.g., for 2021, $11.7 million per individual and $23.4 million per couple). So, the
primary purpose of a trust is to manage assets and control their distribution.
5. A living trust will always avoid probate
By and large, the assets contained within a trust will usually escape probate. There are some circumstances where this does not apply. If there are assets that were not in the trust, those will still have to go through the regular probate process. This is why it is of the utmost importance that your trust is fully funded with all of the assets you wish to pass on. An experienced lawyer will be able to guide you on how to maintain your trust so it works just as you intend.
If you’re considering setting up a living trust, give us a call or book a consultation online. We are happy to walk you through the process.
Meza Talbott Law
A Family + Estates Firm
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