Common Misconceptions Regarding Trust Planning

1. Trusts Are Only for Rich People

• Reality: While trusts are often used by individuals with significant assets, they can be beneficial for anyone. For example, they can help avoid probate, provide for minor children, protect assets, or manage assets if you become incapacitated.

  
  

2. A Will Avoids Probate

• Reality: A will actually must go through probate, which can be a time-consuming and costly process. A trust, on the other hand, can often bypass probate entirely.

  
  

3. Trusts Are Only for Avoiding Estate Taxes

• Reality: While certain types of trusts, like irrevocable life insurance trusts or charitable remainder trusts, can reduce estate taxes, many trusts are used for reasons unrelated to taxes—such as managing assets, protecting beneficiaries, or ensuring privacy.

  

  
  

4. Once I Have a Trust, My Estate Plan is Complete

• Reality: A trust is just one part of an estate plan. Other documents such as a durable Power of Attorney, burial instructions, HIPAA release, and a living will may also be needed. Further, regular reviews and updates are necessary to ensure that it reflects changes in the law, family dynamics, and asset ownership.

  
  

5. Trusts Are Too Complicated and Expensive

• Reality: While trusts can be more complex than simple wills, they don't have to be overly complicated or expensive. The costs vary depending on the type of trust and the complexity of your estate, but many people find the benefits worth the investment.

  
  
  
  

6. Trusts Are Only for After Death

• Reality: Trusts can provide benefits during a person’s lifetime, such as management of assets in the event of incapacity. A revocable trust, for example, allows the trust’s creator to manage assets while alive and allows for a smooth transition to beneficiaries after death.