What Are the Most Common Misconceptions About Living Trusts?

living trust

While you’re estate planning, you might be considering whether or not to establish a living trust. Although there are several benefits to creating a living trust, many people hesitate to go through with it because of common misconceptions about how this estate planning tool functions. Please continue reading to learn about the most common myths surrounding living trusts and how a determined  Montgomery County Trust Attorney can help you today. 

What is a Living Trust?

When you devise a comprehensive estate plan, you may establish a trust for your beneficiaries. A trust is a legally binding document that serves many purposes. It’s a fiduciary agreement that enables an individual to oversee and hold their assets for their own benefit or the benefit of others. It can offer various advantages, including avoiding the probate process and minimizing estate taxes.

Understanding the differences between a revocable and irrevocable living trust is crucial. A revocable trust, also known as a living trust, can be changed or revoked should the creator decide to do so. An irrevocable trust cannot be modified after it’s been created. Ultimately, a living trust is a legal agreement that individuals establish during their lifetime to safeguard their assets and stipulate their wishes on distributing them after their death to beneficiaries.

What Are Common Myths About Living Trusts?

Unfortunately, many people avoid establishing a living trust despite its various benefits because of common misconceptions and myths. One of the most common misconceptions about living trusts is that they only benefit the wealthy. In the past, trusts were utilized by wealthy individuals, but estates of all sizes in today’s society can benefit from a living trust.

Moreover, most people believe that even if they have a living trust, their estate will still go through the probate process. However, this is inaccurate, provided your trust is prepared correctly, and your assets are accurately titled. Probate is only necessary when the trust has not been correctly written, you fail to account for all your assets, or you don’t establish a revocable living trust. It’s important to note that a trust created as part of a will is not considered a living trust and will not bypass probate. Instead, it will come into effect after the will has been probated.

Many people also fear that a living trust is too expensive. A well-crafted living trust may have a higher initial cost when compared to a will. However, if you consider the expenses your loved ones will incur during probate after your death, the costs will be offset as a living trust avoids the probate process altogether. In the long run, a living trust is less expensive. Further, many people wrongly assume they must relinquish control over their assets. If you are your trustee, you will retain the power to do anything you please with your assets that you could have done with them before you placed them in the trust. You have the power to choose what happens to your assets.

As you can see, there are several myths about living trusts. If you’re considering establishing a living trust, please don’t hesitate to contact a proficient attorney from JD Katz, who can help you safeguard your assets.