When used as a part of a comprehensive estate plan, a revocable living trust is an invaluable tool. Not only will your living trust let your estate avoid probate, but it will also give you the ability to keep your estate affairs almost entirely private.
Despite the benefits of revocable living trusts, many people hold some mistaken notions about these devices. There are several potentially damaging myths and misconceptions about living trusts that can lead people to avoid creating a living trust. If you are considering creating a revocable living trust, here are some myths of which you should be aware.
Myth 1. You give up control of your assets when you create a revocable living trust.
A revocable living trust works like this: you create a trust, take the property you own as an individual, transfer it into the trust’s name, and then choose how you want the trust property distributed after you die. Though this sounds relatively simple, there is a potential problem here. If you give your property to the trust to own, doesn’t that mean that you are no longer the legal owner?
Yes and no. While the trust will be the legal owner for probate purposes, you will not give up any of the control you have over your personal property. Though the property will now be titled in the trust’s name, you control the trust. You can modify it, revoke it, or change its terms whenever you like.
Myth 2. I’ve created a revocable living trust, so I don’t have to worry about probate.
Yes, it’s true that a revocable living trust will allow you to avoid probate. However, simply creating the trust is not enough to obtain this benefit. After you create the trust instrument you will then have to begin the process of funding the trust. Funding is the process in which you take your individual property and transfer it into the trust’s name as the new owner. If you forget to transfer property or completely avoid the funding process, you effectively make your revocable living trust useless.
Myth 3. I have a revocable living trust, so I don’t need to worry about any other estate planning tools.
A properly funded revocable living trust is great at what it does. Unfortunately, it isn’t great at handling other estate planning needs. A good plan will not only include a revocable living trust, but also a last will and testament, powers of attorney, advance medical directives, and other tools that fit your individual needs. No single estate planning tool is enough to create an estate plan, not even a living trust.
Hopefully, this helps your understanding of a revocable living trust. To learn more about revocable and irrevocable living trusts, come to our estate planning workshops or webinars. Visit our workshop page for more information.