Trusts are widely misunderstood, because people harbor certain misconceptions. In this post, we will look at some myths that circulate about trusts, and we will debunk them one by one.
You lose control of assets that you convey into a trust.
It is said that a little bit of knowledge can be a dangerous thing, and this saying is applicable here. In a broad sense, there are two different types of trusts: revocable trusts and irrevocable trusts.
The names are pretty much self-explanatory. You could not choose to dissolve or rescind an irrevocable trust once it has been established, and generally speaking, you cannot change the terms. If you establish a revocable living trust, you would retain the power of revocation and amendment.
Trusts are only useful for the wealthy.
This statement is partially true, but it is not absolutely accurate by any stretch of the imagination.
The federal estate tax is a major concern for high net worth individuals. It is only applicable on the portion of an estate that exceeds $11.58 million. People that are exposed to the estate tax have to take steps to gain tax efficiency.
Estate tax efficiency strategies will typically involve the utilization of certain types of wealth preservation trusts. This being stated, most trusts are useful for people of relatively ordinary means, and the use of such a trust for most is a family planning document.
Estate administration is complicated when you use a trust.
In many cases, nothing could be further from the truth. If you use a last will to state your final wishes with regard to the distribution of your assets, you would name an executor in the document. This individual would be required to admit the will to probate.
The executor would handle the administrative tasks, and the probate court would provide supervision.
During probate, assets must be identified and inventoried, and final debts are paid. This is a time-consuming process that will take at least eight months, and most South Carolina cases take longer.
There are expenses that accumulate, including court costs, the executor’s remuneration, legal fees, accounting fees, and liquidation and appraisal charges.
Another drawback is the open opportunity to issue estate challenges. Plus, it is a public proceeding, so anyone that is interested can access probate records to find out how the resources were distributed and the assets of the estate.
If you use a revocable living trust as the centerpiece of your estate plan, all of these complications vanish. The assets would be consolidated under one umbrella, and the trustee that is named in the document would be empowered distribute them outside of the probate process.
Trusts are expensive.
Whenever you engage legal assistance, there will be some type of investment involved. However, investments yield dividends, and when you establish the right type of trust, you get supreme value in return. In fact, mistakes that you make due to a lack of knowledge that can be much more costly.
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