Living Trusts – Beware of these 4 Myths
A living trust is one of the most frequently used types of trust. A trust is essentially a contract between the trustee, managing and distributing the assets outlined in the trust document, and the creator. There are several types of trusts available to individuals and couples alike.
Living trusts can be divided into revocable (where the trust-maker can modify the trust until their death) and irrevocable (where the trust’s creator may not make any modifications after it is established).
One of the most misunderstood estate planning tools is the living trust, primarily due to several prevalent misconceptions. This article will look at what a trust is, some essential elements of a living trust, and why a living trust could be critical to your estate plan.
What Are the Benefits of a Living Trust?
A living trust sometimes referred to as a revocable living trust or a living revocable trust, is a legal document that allows the person establishing the trust (the grantor) to maintain control over the assets in the trust until death. The grantor’s successor trustee then distributes the trust’s assets according to their needs.
There are several advantages to creating a living trust as part of your estate plan. The trust frequently helps the assets it contains avoid probate, allowing for fast and easy distribution to your beneficiaries without additional expenses.
A living trust protects your privacy since its provisions are hidden from the public, in contrast to a last will and testament, whose contents become a matter of public record after the testator’s death.
One last note: A revocable trust is named this way because the creator may modify it during their lifetime. An irrevocable trust, on the other hand, cannot.
Consider the following information to see whether or not you should establish a living trust.
Here are the 4 Main Myths Regarding Living Trusts:
#1 – Probate Will be Public
Avoiding probate is a significant consideration for many people when determining if a will or trust is in their best interests. When assets are placed in a living trust, heirs avoid probate. Unlike individuals who only have a will, those who establish living trusts can keep this information private.
Living trusts can also saves time and money for inheritance candidates.
#2 – Managing Finances Through Incapacitation
If the trust-maker becomes disabled, the trustee would have complete control over the funds without court involvement. This is especially beneficial for unmarried people, people who don’t have children or don’t trust their spouse to handle money if they become incapacitated.
Placing assets in a living trust can minimize estate taxes for couples with a significant estate. The couple’s estate may pass on to the beneficiaries without being taxed with proper tax planning.
Living trusts are an excellent way to manage your assets during and after your lifetime. If you have questions about whether or not a living trust is right for you, don’t hesitate to contact our experienced estate planning attorneys.
#3) You Will Not Have to Pay Any Taxes
Even if a person has a living trust, the estate or income taxes may still need to be paid. Additionally, the trust creator will typically only have to pay federal estate taxes if there are more than $12 million in taxable assets.
#4) Assets are Safe From Creditors
Upon your death or incapacity, a living trust can safeguard who controls your assets from creditors. You will still most likely be required to pay your obligations, and you will not be able to hide your assets from creditors by establishing a living trust.
Creditors can still take assets because the individual who established the trust will keep them until their death. On the other hand, an expert estate planner may work with the trust maker to safeguard assets.
Are you interested in setting up a trust yourself? Contact our office at 509-328-2150, and we’ll schedule a consultation to understand your estate planning needs.
The Washington State Bar Association has a great PDF resource on Revocable Living Trusts.