If you’re like most people, you’ve heard at least one of these revocable living trust myths. Today, we set the record straight. But, if you have further questions or wonder whether a revocable living trust is right for you, be sure to consult a qualified estate planning attorney.
MYTH: A revocable living trust provides asset protection.
FACT: By creating trust shares for your beneficiaries, you can give their inheritances with asset protection that you can’t get for yourself without taking your assets off shore. During your lifetime, you cannot use a revocable living trust to create asset protection for your own assets.
MYTH: A revocable living trust always avoids probate.
FACT: A revocable living trust avoids probate only for those assets owned by the trust. In other words, your assets must be funded into your trust to avoid probate. Assets own in your individual name guarantee probate even if you have a trust.
MYTH: A revocable living trust is only for the wealthy.
FACT: Revocable living trusts benefit most people. Benefits include incapacity planning, pet planning, special needs beneficiary planning, asset protection for beneficiaries, federal estate tax savings for married couples, and probate avoidance.
These trusts are easy to set up and simple to administer.
MYTH: A revocable living trust eliminates all of the work after you die.
FACT: While a revocable living trust lessens the work to be done after you die, it does not eliminate it completely. A trust is not a magical legal document that jumps up and pays last bills, manages investments, maintains and sells real estate, files appropriate tax returns, and distributes assets to trust shares for beneficiaries. The trustee does all that.
MYTH: A revocable living trust saves federal estate taxes for everyone.
FACT: For an unmarried individual, a revocable living trust does not offer reduced federal estate taxes. For a married couple, a trust can make full use of each spouse’s lifetime unified credit which reduces the federal estate tax bill.