There is a lot of misinformation circulating about estate planning, which is understandable given how complicated this area of law really is. I want to share with you five myths about living trusts and what you can do to ensure that your wishes are carried out and your loved ones are cared for, in the event of your incapacitation or death.
Living trusts, for example, are one of the most commonly misunderstood aspects of estate planning, but this should not stop you from creating one if that is what is in your best interest. According to a study done, these are the most common myths about trusts:
MYTH #1: Living Trusts Reduce Taxes
While a “living” trust or revocable trust has many purposes, including avoiding probate and creating certain terms for using the money within the trust, they do not prevent inheritance tax or estate tax. There are other types of trusts that can be created to avoid or reduce estate tax, though only 0.1 percent of people fall into this tax bracket. Currently, as of April 2023, there is no federal inheritance tax, but there is a federal estate tax. The federal estate tax generally applies when you receive assets over $12 million.
MYTH #2: Probate Should be Avoided at all Costs
Probate does take some time and can incur costs. However, probate in Florida is relatively straightforward. In many cases, probate costs less than $5,000. The probate monster is not real in the majority of cases. The cases you hear about that drag on for years and cost hundreds of thousands of dollars are those where the family is not in agreement, or the deceased did not make their wishes known before they passed.
MYTH #3: Only a Living Trust Can be Used to Avoid Guardianship
While a living trust can be created to make financial decisions for an incapacitated person, so too can a durable power of attorney. In fact, a power of attorney may be a better option for avoiding financial decision-making guardianship. A power of attorney is better than having a copy of your trust in the hands of every banking institution, insurance company, etc. If you have a trust you want to keep it private and use it as a power of attorney certainly does not accomplish that.
MYTH #4: Living Trusts Can Be Used to Avoid Creditors
When the grantor of a trust is still alive, the assets within a revocable trust are the property of the grantor. As such, these assets can be pursued by creditors just as if their money was in a bank account or written into a will. A revocable trust cannot legally shield your assets from creditors, only an irrevocable trust can accomplish that.
MYTH #5: Living Trusts Ensure Privacy
In Florida, a trust is a private document that does not become part of the public record. A revocable trust may offer more privacy than a will that passes through probate, or it might not. If privacy is a concern, then a trust is a good option for you.
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Estate planning is not difficult. We make the process simple. We ask you some questions (via a questionnaire). We go over your unique plan to ensure it captures all of your wishes and then we have a signing ceremony. All done within two weeks. Schedule your free consultation today at: https://calendly.com/arevalolaw