A recent article on EstatePlanning.com contains the following lists of misconceptions about a Living Trust:
- A living trust is expensive
- Trusts are for wealthy people
- Most people go through probate anyway so a living trust is a waste of money
- Giving up control over assets
- High Trustee Fees
- Separate Tax Identification Number and Tax Return to file
However, most of these misconceptions are not true. First, a living trust can save money even though the cost to setup the living trust is higher than the cost to setup a will. A properly funded living trust can avoid a costly conservatorship during the life of the Trustmaker and avoid the need for a probate at the death of the Trustmaker. Further, asset protection benefits may exist for the Trustmaker’s beneficiaries.
Second, living trusts are not only for wealthy people. Living trusts can help all sorts of people. As mentioned above, a living trust can avoid conservatorships, probate, and possible asset protection benefits for the Trustmaker’s beneficiaries. Especially for those adults with minor children, a living trust can avoid having a conservator appointed in charge of all the assets the minor will inherit without the living trust.
Third, a well drafted Trust that is completely funded by the Trustmaker avoids probate. This saves the time, effort and money involved with the probate process. Why not be one of those few people that actually avoid probate and the expense of it for your loved ones?
Fourth, a person does not give up control over their assets as long as they are the trustee of their living trust. A trustee of a living trust has complete power to do whatever they want with the assets of the trust just as if they owned the assets without a trust.
Fifth, it is true that a trustee may be compensated for their services, but most Trustmakers name family members as successor trustees and mostly these family members do not seek compensation. Professional trust companies do charge fees for serving as Trustee. However, these fees are not charged until the trust company begins managing the trust assets. Further, a trustmaker is not required to appoint a trust company as a successor trustee.
Finally, a trust does not need its own tax identification number or need to file a separate tax return until after the death of the Trustmaker(s). The IRS ignores the existence of the trust during the lifetime of the Trustmaker(s). To report income, the Trustmaker uses their social security number. On the death of the Trustmaker(s) the Trust becomes irrevocable and at that point in time a separate tax identification number along with a tax return will be needed.