Revocable Living Trusts (or simply, living trusts) are a powerful, yet often misunderstood estate planning tool. Many people miss out on an important estate planning document simply because of preconceived notions about living trusts.
In reality, living trusts offer many benefits and are one of the most useful estate planning strategies available to protect you and your family’s future. Let’s debunk some common myths surrounding living trusts so you can consider whether or not this estate planning tool might be right for you and your loved ones.
Myth #1: Living trusts are only for the very wealthy
For many, the word ‘trust’ conjures an image of wealth. You may think of billionaires leaving large inheritances and sprawling estates to their children, and immediately brush the word aside.
But the reality is, a living trust can provide benefits to many ‘regular’ people who are not among the super wealthy. A living trust is a fantastic foundation for many estate plans. If you want to make things easier and provide protection your family in the event of your incapacity or death, a living trust may be the right tool for you.
Myth #2: You give up control of your assets when you create a trust
Many believe that creating a living trust transfers control of assets away from the creator of the trust. Fortunately, as the grantor (creator) of the trust, you’re still in charge.
Once the living trust is created, you maintain control of your assets, including how they are distributed to beneficiaries, when they are distributed, and who will control your trust in the event of your incapacity or death.
You will also have continual access to the funds in the living trust. As a trustee of your own living trust, there is no need to worry about someone else spending or investing your assets without your knowledge, and you’ll be able to retrieve funds when you need them. Remember, as a trustee you are still the boss.
Myth #3: Living trusts only benefit beneficiaries, not the trust creator
While living trusts are designed to pass assets to beneficiaries, grantors (the trust creators) also benefit from setting up a living trust. You’ll be able to control how your affairs are handled and how your assets are distributed in the future, giving you peace of mind now.
You’ll also be able to maintain your privacy. Unlike a will, a living trust is a private legal document that will not become a part of the public record in Minnesota. You’ll be able to keep your estate details private, including information about your assets and beneficiaries.
Myth #4: Creating a living trust is complicated and expensive
It’s true that living trusts are more involved legal documents than wills. They have to be to provide you and your loved ones with benefits like avoiding probate and avoiding court control of assets at incapacity. Thankfully, they can be efficiently set up by an estate planning attorney.
While living trusts are typically more expensive than wills up front, they can actually save you and your loved ones significant amounts of money by avoiding probate expenses. They’ll also save large amounts of time, and help your loved ones avoid aggravation and stress in the future by smoothly distributing assets without the need for probate proceedings in court.
Myth #5: A living trust can’t be updated
Many believe that once it’s set up, a living trust is written in stone. However, since it’s a ‘revocable living’ trust, it can be continually updated and even revoked.
With the help of an estate planning attorney, you can modify or revoke your living trust when changes occur in your life to ensure your assets are handled correctly and your loved ones are protected.
Myth #6: Living trusts automatically avoid probate
Living trusts can help you avoid probate, but setting one up doesn’t guarantee this automatically. With the help of an experienced estate planning attorney, you’ll need to make sure your trust is set up correctly and ensure you fund or transfer your assets to the living trust.
Any asset that isn’t properly funded to your living trust may be subject to probate. Thankfully, as long as you fund your assets into your living trust, you’ll likely be able to avoid probate.
Myth #7: A living trust keeps your wealth safe from creditors
While a living trust can protect who controls your assets in case of your death or incapacity, you can’t avoid payments to creditors by transferring assets to a living trust. You’ll still likely need to pay your debts, and you won’t be able to make your assets off limits to creditors by setting up a living trust.
Myth #8: Living trusts protect your assets from nursing homes
Living trusts are self-settled, meaning that you maintain control of your assets and receive the benefits of owning them. This is a central advantage of creating a living trust, but it does mean that a trust won’t protect your assets if you need to pay for a nursing home.
Setting up a trust won’t help you qualify for benefits like Medicaid or Medical Assistance. Assets held in your living trust are still yours. Accordingly, you would still need to pay for a nursing home or long-term home care services.
Myth #9: A living trust is all I need for an estate plan
A living trust is a very effective estate planning tool, and can serve as a powerful foundation to your estate plan. However, it doesn’t represent a complete estate plan by itself.
You’ll need other estate planning documents to supplement your living trust, like a ‘pour-over will,’ advance medical directives, powers of attorney, and more.
Myths Busted? Ready for a Living Trust? Mullen & Guttman Can Help
Now that you’ve seen past the myths, it’s time to talk to an estate planning lawyer to determine if a revocable living trust is the right tool to address your unique concerns and achieve your goals. Schedule a free consultation to learn more about living trusts and how you can take control of your future today.