If you have recently begun the estate planning process, you may have heard about revocable living trusts. For many people, living trusts are essential pieces of an estate plan and something that can provide significant benefit to you and your family. Unfortunately, there are a lot of incorrect ideas floating around out there about what trusts are, how they work, and why you might want one. Let’s take a look at some of the more common myths and explain why they are not true.
I don’t need a living trust because I have a will.
Wills and living trusts are not mutually exclusive devices. A properly prepared will and living trust complement one another, making it far easier to manage your estate. Trusts are not overly complicated, and when created in conjunction with a last will and testament, they are one of the best estate planning tools available to most people.
I can make a living trust and avoid estate taxes.
This one is not even close to being true. Living trusts don’t do anything to reduce the amount of estate, gift, or generation skipping transfer taxes your estate has to pay. There are some other devices that can minimize your tax exposure, but you cannot count on a living trust to do so.
Once I make a living trust my estate will avoid probate.
Also false. Making a living trust is great, but if you forget to properly fund the trust it will do nothing to avoid probate. Funding is the process of transferring your property to the trust own. If not done properly, probate still applies to the property that is left out of the trust.
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