There are a lot of misunderstandings about Living Trusts. As a consequence, people may assume they are too complex or useless without taking the time to review the benefits.
Here are some common misunderstanding and the facts:
“A Living Trust is expensive.” But when comparing costs versus a will-based estate plan, you should also include the costs of probate when you die, the costs of a conservatorship if you become incapacitated and the costs of a guardianship if you leave assets to a minor child. If you compare the costs of a will-based plan to a trust-based plan, the Living Trust plan will be less expensive in the long run for many families.
“I have to give up control over my assets.” If you are your own trustee, you can do anything with your assets that you could do before they were in the trust: buy/sell, change your trust or even cancel your trust. If you name another person to be your trustee, you can replace the trustee at any time if you are not satisfied. You decide when your loved ones will receive their inheritance. With Living Trust you are able to keep full control over your assets while you are alive, if you become incapacitated and when you die.
“I will have to pay Trustee fees.” As long as you are your own trustee, you don’t have to pay any management fees. Successor trustees are entitled to receive a fee, but family members often do not take one. Professional Trustees like banks do charge a trustee fee to administer your assets in the trust.
“A separate tax ID number and a separate tax return for the Trust will be needed.” While you are living, you continue using your own social security number and file your tax return in a normal way. If your trust will continue after you die it may need a separate tax ID number and tax return under certain situations.
It’s easy to see how trusts are getting a better reputation in recent years. Generally speaking, costs for probate and court (conservatorships/guardianships) take a higher percentage from smaller estates, which can least afford it, than from larger ones. In addition to the cost savings, most people choose a Living Trust because they want to spare their loved ones the inconvenience of dealing with the courts in the future. If your Living Trust is properly prepared and assets are properly titled, your assets will not go through probate court.
**If you would like more information regarding these issues, please feel free to contact us! **