There are a lot of misconceptions out there when it comes to certain estate planning documents. Trusts are a great example. Many California residents may not understand how they really work; therefore, they may be afraid to use them.
There are at least five common misconceptions about trusts. The first has to do with estate taxes. Many people tend to think that the only reason to set up a trust is so that estate taxes can be minimized or avoided. While this is a benefit to utilizing a trust, it is not the only reason to have one.
The second common misconception has to do with the size of an estate. Trusts are not just meant for the super wealthy. When it comes to trusts, it is not about the size of the estate. Instead, it is about making sure the estate is protected.
The third common misconception has to do with flexibility. By putting assets in a trust, some people believe it means that they no longer have full control or that they are unable to make changes. Depending on the type of trust created, this is not necessarily true.
Misconception number four has to do with naming a trustee. Naming the trustee can be a challenge. It is a job that should only go to a person who is prepared to handle the role. It does not have to go to a family member or friend, especially if the estate owner feels that he or she really has no one available who is ready to take on the responsibility.
Finally, misconception number five has to do with creditors. Some people mistakenly believe that if assets are placed in a trust, creditors can make no claims to them. This is not always true. It really depends on how the trust is created and worded.
Trusts seem simple enough to create. The truth is, though, they are complex legal documents that if not written properly may not offer the protections for which one is searching. An experienced estate planning attorney can assist California residents in creating trust documents that do offer the protections and flexibility they desire.
Source: wmur.com, “Money Matters: Five misconceptions about trusts“, Marc Hebert, Sept. 14, 2017