What Are Common Misconceptions About Family Revocable Trusts
A recent survey found that only about 33% of Americans have established an estate plan. Thus, taking these initial steps to prepare for and create an estate plan is a great success in and of itself.
One of the core documents included in an estate plan is the revocable living trust. However, despite its popularity and effectiveness as an estate planning strategy, several common misconceptions about revocable trusts that frequently prevent people from considering it as part of their plan.
As you begin planning for your future and researching strategies and tools to use in your estate plan, it’s important to be wary of certain myths and misconceptions that may otherwise hinder your ability to establish a plan that fits your needs and goals. Use our guide below to learn more about some common misconceptions and see how the estate planning attorneys at Mills & Anderson can help you prepare for your future today.
Debunking Revocable Trust Misconceptions: 4 Common Misconceptions About Revocable Trusts
Revocable trusts are often an integral part of an estate plan, providing various benefits to the individual creating it and their loved ones and beneficiaries. Nevertheless, many people choose to forego incorporating a revocable trust into their estate plan due to the many misconceptions surrounding it.
Before you decide to write off a revocable trust as an option, here are four common myths and misconceptions to be aware of so you can make a more informed decision about whether a revocable trust might align with your specific estate planning needs and goals.
“Trusts Are Only for the Wealthy”
One of the most common misconceptions about trusts is that they are only for the wealthy. In fact, according to a 2023 survey, 35% of respondents cited “not enough assets” as a primary reason for not creating an estate plan. In reality, there is no income level or estate value threshold to create a trust.
Of course, a revocable trust may not make sense in all situations. While it is true that wealthier individuals do frequently choose to create a trust, trusts can also benefit a wide range of individuals, regardless of their background and income level. Even if you don’t consider yourself “wealthy,” consider speaking with an experienced planning attorney to discuss your situation and see whether a trust might be right for you.
“Trusts Are the Same as Wills”
Contrary to popular belief, trusts and wills are separate and distinct legal documents. While these are both valuable estate planning tools, they have some key differences. Below are some of the primary distinctions between the two:
|Effective Date||Assets placed in a trust can be managed and distributed to your beneficiaries during your lifetime, upon your death, or through a combination of the two, depending on the specific terms of the trust agreement.||A will only becomes effective upon your death. It does not create a tool for the management or distribution of your assets during your lifetime.|
|Probate Avoidance||One of the greatest benefits of a trust is the ability to avoid probate, which can be a costly and time-consuming process. While probate may not always be avoided, a well-drafted and fully funded trust can allow your estate to pass to your loved ones after your death without going through probate..||A will allows you to designate beneficiaries and make your wishes regarding your estate and assets clear. However, in most cases, even if you have a will, the executor of your estate will have to participate in the probate process in court.|
|Asset Management During Incapacity||Within a revocable trust, you can also provide instructions on how assets will be managed if you become incapacitated but are still living.||Again, wills only address asset distribution after your passing. Thus, incapacity planning is not an option in a will, as in a trust.|
“Trusts Eliminate the Need for Other Estate Planning Documents”
Although a trust is a great tool to have in your estate planning arsenal, it’s important to remember that a trust does not necessarily eliminate the need for other estate planning documents. Below are some additional documents that you may want to consider incorporating into your comprehensive estate plan:
- Pour-over will,
- HIPAA authorization,
- Durable (financial) power of attorney,
- Healthcare power of attorney (healthcare directive), and
- Living will.
If you have questions about how these and other estate documents work and whether they make sense for your situation, speak with the attorneys at Mills & Anderson today.
“Trusts Aren’t Worth the Time or Expense to Create”
When it comes to revocable trusts, many people are deterred by the time and expense involved in creating one. Trusts are often more complex than wills and frequently require additional time and expense to create. In many cases, however, spending more money at the outset to create a thorough trust that adequately meets your needs and goals can save significant costs in probate and other legal fees for your loved ones in the long run.
Speak with an Experienced Estate Management Attorney Today
Revocable trusts and misunderstandings like the ones above are often intertwined. However, by debunking these myths, we hope you’ll better understand revocable trusts and how they can be used as an effective tool in your estate plan.
If you have questions about whether a trust might be right for your estate planning needs, the team at Mills & Anderson is here to help. Our estate planning attorneys have decades of combined experience helping clients protect their families and assets as they prepare for the future. We have the resources of a large firm while also offering personalized and individually tailored service to each of our clients.
When you’re ready to get started, call us to discuss your estate plan and see how we can help you move forward today.