We have people come to us after family members have made estate planning mistakes who are looking for solutions after the fact. Invariably, these cases stem from a lack of understanding. For this reason, we do everything possible to pass along sound information to prevent future problems.
With this in mind, we are going to look at some misconceptions that people have about wills and trusts in this blog post, and we will provide clarity.
1.) I don’t need a will, because the state will take care of everything.
This misconception is one of the most damaging. It is true that the state would sort things out if you were to pass away intestate or without a will or trust. However, if the intestate succession laws are used to determine how your property is distributed, it is very possible that people that you love will be disinherited.
Plus, an intestacy case can be time-consuming and complicated. Different people who have interests could come forward presenting arguments before the court, and the situation could cause hard feelings among loved ones that linger for years.
2.) Trusts are only for the wealthy.
The idea that trusts are only for very wealthy people is another misconception that many people harbor. There are trusts that are used by high net worth individuals who have advanced objectives like asset protection and estate tax efficiency. However, there are trusts that are useful for “the rest of us.”
A revocable living trust can be a good choice for people of relatively ordinary means. These trusts facilitate efficient asset transfers, because the probate process is not involved when assets are being distributed after the passing of the trust creator.
On the other hand, a last will would be admitted to probate. The heirs would not receive their inheritances while the process of probate was underway, and it will typically take close to a year. This is one drawback of probate, but there are others.
Probate avoidance is just one of the advantages that living trusts provide. In addition to living trust, there are other types of trusts that can satisfy objectives that everyday people may have. You definitely do not have to be a multimillionaire to benefit from the creation of a trust of some kind.
3.) A living will does the same thing as a living trust.
This is another misconception that can get people into trouble. We have just provided a basic description of what a living trust can accomplish. A living will has nothing to do with monetary matters.
Many people become unable to communicate at the end of their lives. In some of these cases, doctors can keep them alive using artificial life-support measures like artificial hydration and nutrition and mechanical respiration. With a living will, you state your preferences with regard to the utilization of these measures.
4.) If you have a living trust, you don’t need a will.
There are those who naturally assume that a living trust would completely replace a will. If you have a living trust, there would be no reason to have a will, right?
In fact, there is a good reason to have a certain type of will, even if you have a living trust. You have to proactively convey assets into a living trust. This is not difficult to do, but action is required. If you have property that you do not convey into your living trust, it would be in your personal possession. The property would not be distributed in accordance with the instructions that are included in the trust declaration.
To account for this, you could include a pour-over will as an accompanying document when you create your estate plan. This type of will would allow the trust to capture assets that were in your personal possession when you passed away. Ultimately, all of the assets that comprise your estate would be consolidated, and they could be distributed in accordance with the trust terms.
Free Special Report
We have looked at a few misconceptions in this blog post, and hopefully, we have answered some questions that you may have. If you would like to continue to build on your knowledge, download our in-depth special report on wills and trusts.
This report is being offered free of charge at the present time, and it is simple to access your copy through this website. Click this link and the report will be yours: Free Report on Wills and Trusts.