People sometimes harbor misconceptions about various aspects of the estate planning process. As a result, they make decisions that are less than ideal. In some cases, their families pay the price because negative consequences can unfold.
This definitely enters the picture when it comes to trusts. In this post, we will expose four myths about trusts that are often circulated.
You Surrender Assets You Transfer to a Trust
One of the notions many people embrace is the idea that you permanently surrender access to all assets that you signed over to a trust. This is completely false.
Broadly speaking, there are two different types of trusts: revocable trusts and irrevocable trusts. The names are essentially self-explanatory. You can revoke or rescind the former, and you cannot rescind the latter.
If you can revoke your trust if you ever choose to do so, you certainly maintain control, and you would still have access to the resources while it is intact. Even if you have an irrevocable trust, some of these trusts allow for monetary distributions to the grantor or someone else.
Trusts Are Complicated
This is another false belief that many people harbor. When a last will is used as an asset transfer vehicle, it is admitted to probate. The executor that is named in the document will undertake the administration tasks, and this is done under the supervision of the probate court.
During probate, final debts must be paid, including taxes. Creditors are given a certain amount of time to come forward, and the executor must identify and inventory the assets that comprise the estate.
Probate will typically take about eight months at minimum, and more complex cases can be stalled in probate for longer periods of time. There are expenses that accumulate during probate, and it is a public proceeding, so the records are available to the general public.
If anyone wants to challenge the validity of the will, they could come forward and make a case during probate. Ultimately, when the court closes the estate, the executor would be empowered to distribute the inheritances to the heirs.
That is not a streamlined process, but everything is different if you use a revocable living trust as the centerpiece of your estate plan. The trustee that you name in the document would be able to distribute assets to the beneficiaries outside of probate.
Trusts Are Expensive to Create
The last misconception we will look at here is the cost factor. There are those that think that you have to incur big legal fees to get an attorney to establish a trust on your behalf.
This is not the case at all. As we stated, there are costs involved when use a simple will to state your final wishes. This is a complex subject, and we cannot cover every aspect of it here, but poorly constructed estate plans can cost your family money in the long run.
While you do have to make a modest investment to engage legal counsel, it will yield significant dividends. In many cases, the guidance will pay for itself.
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