Trusts can be a very useful tool when it comes to estate planning, but many people don’t consider them an option because of some common myths.
Myth #1 – Trusts Lead To Spoiled Children
One of the most common myths about trusts is that it means spoiling your children with the wealth they didn’t earn. The word “trusts” typically evokes an image of the children of the uber-wealthy throwing away money by the fistful on fast cars, fancy clothes, extravagant vacations, and regular trips to rehab. The idea of leaving money in a trust for your children or grandchildren also gives the impression that you’ll be enabling the next generation to avoid honest work to live off your successes.
This image is largely perpetuated by the tabloid coverage of the children of celebrities. It is also highly inaccurate in representing what a trust can do for you and your family.
Trusts are a tool that can be used very creatively to achieve almost any goal you have for your estate. An experienced estate planning attorney can design a trust that set up any number of conditions for financial distributions to your heirs based on what these goals are.
Myth #2 – Trusts Are Only For The Wealthy
Many of us only hear about trusts in relation to the circumstances mentioned in Myth #1. Because of this media-driven perception, it is often assumed that these estate planning tools are only necessary or useful for the uber-rich.
The truth is, a trust can be a great idea even if you don’t have millions in the bank. For example, anyone who wishes to help their beneficiaries avoid the stress, expense and hassle of probate court should consider putting their assets into a trust. A revocable living trust can help your heirs completely sidestep a probate court and allow you to exert control your assets during your life and after you’re gone.
A trust is also a great way to protect your assets during your lifetime in the event that you become incapacitated, whether because of illness or injury. You can lay out the terms by which your money should be managed in case you are unable to do so yourself or make your wishes known, and this can be done while avoiding courts, guardianships, and conservatorships.
Myth #3 – Once My Assets Are In A Trust, They Can’t Be Taken Out
Putting your assets in a trust, doesn’t mean you are locking up your money and throwing away the key. The truth is, trusts can be as accessible — or inaccessible — as you would like them to be.
When you’re setting up a trust to be used during your lifetime for your own benefit, making it completely accessible will be important. This doesn’t limit you from also imposing certain controls on how much access your heirs have to the estate and how the assets will be controlled if you become incapacitated.
Myth #4 – I Have A Will, So I Don’t Need A Trust
While a will should absolutely be a key part of your estate plan, this doesn’t mean that trust shouldn’t also be considered. There are several reasons why a trust should be used in addition to a will:
- A will does not afford control over how your assets should be handled if you become incapacitated.
- A will must pass through probate court to be administered.
- A will must be updated regularly to reflect changes in your life, such as marriage, divorce, the birth of a child, etc.