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Home » Estate Planning » Living Trust: 3 Most Common Myths

Living Trust: 3 Most Common Myths

March 2, 2016Estate Planning

living trustA living trust is a particularly useful estate planning tool and should be included in every estate plan.  However, before you take that step, there are a few common myths regarding living trusts of which you should be aware.  This article will debunk the 3 most common myths.  For a complete understanding of how this estate planning tool can benefit you, discuss your options with your Los Angeles estate planning attorney.

Myth No. 1: You have to give up control of your property when you create a living trust

While it is true that creating a trust means that trust will become the legal owner of the property you place in trust.  A common misconception is that you must relinquish all control over that property once it is transferred to the trust.  That is not true.  One of the greatest benefits of a living trust is that it is revocable.  That means you will retain the ability to make any changes to the trust and the trust property at any time during your lifetime.  It also means that you also have the authority to manage the trust and use all of the property owned by your trust.

Myth No. 2: Living trusts allow you to avoid estate taxes

This is a common misconception.  In reality, revocable living trusts do not help to avoid estate tax liability because they are revocable.  For this same reason, living trusts do not provide asset protection.  That is because the revocable nature of a living trust essentially means the assets are not permanently removed from your estate.  If you need asset protection or estate tax relief, you should discuss an irrevocable trust with your estate planning attorney.

Myth No. 3: With a living trust you won’t need any other estate planning tools.

Despite all of its valuable characteristics, a living trust cannot accomplish everything you need for a comprehensive estate plan.  For example, living trusts do not allow you to name an executor or guardian for your minor children.  To accomplish those tasks, you also need a last will and testament.

The basic steps in creating a living trust

Now that you know the truth about living trusts, there are just a few straightforward steps required to create a revocable living trust.  Your estate planning attorney will initially meet with you to determine what your particular needs are.  From this, your attorney will draft the trust document which contains all of the terms of the trust.  That is the instructions for the trustee to follow.  After drafting the trust document, the property must be transferred or “funded” into the trust.  It’s really that simple if you have the assistance of an experienced trust attorney.

Advantages and disadvantages of a living trust

The primary purpose most clients have for creating a living trust is to avoid the lengthy and costly probate process.  But, before you decide whether a living trust is the right choice, you should consider both the advantages and disadvantages of creating a living trust.  One major advantage is probate avoidance while a disadvantage is how limited a trust will usually be.

Living trusts provide probate avoidance

Living trusts often save time and expense in estate planning.  There are also valuable tax advantages, as well. For instance, a living trust may decrease the amount of estate taxes owed by your estate. Also, because living trusts avoid probate, the terms of your trust document will remain private.

Living trusts also provide legal protection

Another advantage of a living trust is that it is legally enforceable in court.  Unlike a last will and testament, which only describes how you want your property distributed, a living trust is a binding agreement between you and your trustee to perform certain tasks.  This means that in the even someone challenges a transfer of assets made after your death, the court can easily enforce the terms of your trust document.

Living trusts are limited in coverage

One disadvantage to using a living trust is that is generally more limited in its coverage than a last will and testament. That is because a living trust refers only to specific property – the property that was funded to the trust.

Join us for a free seminar!  If you have questions regarding a living trust or any other estate planning needs, please contact the Schomer Law Group either online or by calling us at (310) 337-7696.

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Scott Schomer, Estate Planning Attorney
Scott Schomer, Estate Planning Attorney
A graduate of Boston University School of Law, Scott P. Schomer is a frequent lecturer on estate planning and elder law issues, having discussed these important issues on local and national television. A seasoned courtroom advocate, Scott has obtained combined judgments and verdicts in excess of twenty-five million dollars for his clients. Scott has served as a member of the Los Angeles Superior Court Probate Volunteer Panel (PVP Attorney), Probate Settlement Panel and a Judge Pro Tempore. Scott's expertise has been recognized by his peers with such accolades as a life-time membership in the Multi-Million Dollar Advocates Forum, the Five Star Wealth Manager designation, and repeated nominations as California Super Lawyer.
Scott Schomer, Estate Planning Attorney
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