Living trusts are some of the most popular estate planning tools around today because they afford such powerful protections and abilities. Unfortunately, there are a lot of myths and misperceptions surrounding these essential estate planning devices that far too many people believe. To help dispel some of these popular living trust myths, today we are going to take a closer look at a pair of them, and explain why they are wrong.
Myth 1. Using a living trust means you lose control over your property.
Living trusts are great because they allow you to make inheritance choices outside the probate process. When you create a revocable living trust in Kansas or Oklahoma, you’ll transfer the title of your property into the trust’s name. Since you create the trust, you get to determine how the trust will distribute that property after you die. Further, because the trust will continue to exist as a separate legal entity after your death, it can make those property transfers outside of the probate process. Otherwise, should you choose to leave inheritances through, for example, a last will and testament, state probate court will have to get involved before your inheritors can receive their inheritances.
This ability to transfer property, but only property the trust owns, has led to the myth that, once you transfer your property to the trust, it is no longer yours to control. While this seems like a reasonable assumption to make, it is not an accurate description of how living trusts work. This is because you, as the person who makes the trust, will serve as both the trust manager and the trust beneficiary. This means that any property transferred into the trust’s name will never be outside of your control, and you will still retain the legal right to use it in any way you see fit.
Myth 2. If you have a revocable living trust, you won’t need to worry about estate taxes.
Even though revocable living trust are excellent estate planning tools, they are not suitable for every estate planning goal. As a case in point, revocable living trust will not help you eliminate or reduce any potential tax liability issues you might have.
While there are several types of trusts that can help eliminate, and even reduce, potential estate tax liability issues, living trusts are generally not one of them. Living trusts offer limited benefits when it comes to estate or income tax mitigation, so you will need to look elsewhere if these issues concern you.
Further, living trusts do not provide significant asset protection benefits during your lifetime. Anyone creating an estate plan seeking asset protection or tax mitigation benefits need to talk to us so we can discuss your options.
Parman & Easterday