Estate planners receive calls about a variety of situations that a revocable living trust is under consideration. Here are facts dealing with popular myths and misconceptions about living trusts:
Living trusts do not take away control of your assets - Just make sure you name yourself both trustor/grantor and trustee of your living trust.
Living trusts do not reduce estate taxes - While living trusts prior to 2011 could be used to double estate tax exemptions for married couples to give them the same benefits as a single person, a revocable living trust does NOT reduce estate taxes.
Living trusts do not protect assets from lawsuits - If you are at fault in a car accident, a living trust will not protect your assets from a judgment against you. Talk to your insurance agent about an inexpensive umbrella policy.
Living trusts can be contested - Just because a living trust contains a No Contest Clause does not mean someone can not challenge the living trust. The No Contest Clause just makes it more difficult to successfully contest a living trust.
Living trusts do not protect all assets from probate - If you forget to transfer an asset into your living trust and the asset does not have living beneficiaries named, that asset will go through probate. In addition, some scenarios may require probate to cut off claims by creditors or deal obtain state estate tax waivers (if applicable).
Living trusts do not affect income taxes while you are living - Your tax returns will look the same whether or not you have a living trust.
Living trusts do not mean immediate transfer of an estate - Many steps involved in probate must be undertaken when a living trust is used. Notice must be made to creditors and given a window of opportunity to make a claim before the estate may be distributed to beneficiaries. A living trust only helps avoid the pace a court may be moving.
Living trusts are not just for the wealthy - Probate can affect many people with small estates at or under $100,000 and can be used to control life insurance payouts to young beneficiaries.
Living trusts are not expensive to set up - You can find do-it-yourself kits and online services for less than $500 and often find quality attorneys who can prepare a living trust for between $500 and $1500. The more you pay, the more help you should receive with transferring assets into the trust and ensuring topics are covered you wouldn't normally think about with inexpensive kits. Look at multiple sources for your living trust until you feel comfortable.
Transferring assets to a living trust does not help you qualify for Medicaid - Talk to an estate planner about options but any estate planner who tries selling you a living trust to avoid Medicaid spend-down should trigger an automatic second opinion.