On the other hand, in the estate planning realm, that information can be quite damaging. In this post, we will look at three common misconceptions in an effort to raise awareness.
Only Wealthy People Need Trusts
A simple will is the document that most people think of when the subject of estate planning comes up. Many of them are under the impression that trusts are used by very wealthy people, so they do not even consider the possibility of using a trust.
In reality, this is totally untrue. Yes, there are trusts that are utilized by high-net-worth individuals that have multi-generational wealth and estate tax concerns. However, they also drive motor vehicles. Does this mean that cars are only for the wealthy?
Sure, a multimillionaire may drive a car that an ordinary person would never have, but there are many different types of motor vehicles in all price ranges. The same dynamic can be applied to trusts that are used in the estate planning field.
For example, the revocable living trust is a relatively simple, straightforward device that can be the ideal asset transfer vehicle. When you have a living trust, the trustee will distribute the assets to the beneficiaries outside of probate after you pass away.
A will would be admitted to probate, which is a legal process that is costly, intrusive, and time-consuming. You can also include spendthrift protections when you have a living trust, but the people that are named in a will receive lump sum inheritances all at once.
In addition to the revocable living trust, a Medicaid trust can be very useful for people of relatively ordinary means. This program will pay for nursing home care, but Medicaid does not cover the custodial care that you would receive in a nursing facility.
You can preserve your legacy if you convey resources into an irrevocable Medicaid trust. A trust can also be used to install an adult trustee that would be empowered to manage assets on behalf of a minor child.
These are a few of the circumstances that call for the utilization of a trust, but there are others. You should never assume that a simple will is the right choice for anyone that is not extremely wealthy.
You Can Simply Use DIY Estate Planning Templates
There are websites that sell boilerplate templates that you can use to create legal documents, including wills and trusts. Do you really think that estate planning is a suitable do-it-yourself project for someone that knows nothing about the legalities?
When you plan your estate, you are arranging the distribution of everything that you have earned during your life. This will be your final act of giving to the people that you love the most, and there are mistakes that can be made that would complicate the estate administration process.
If you want to roll up your sleeves and do some type of home improvement or hobby project, it can be rewarding, and you can save money in some cases. This being stated, you have to know where to draw the line, and legal matters are on the other side of that line.
You Lose Control of Assets in a Trust
Some folks never consider the possibility of using a trust because they do not want to lose control of their assets. This is understandable, and you do surrender incidents of ownership when you convey assets into an irrevocable trust.
However, the dynamic is completely different if you establish a revocable living trust. The grantor of the trust is the person that establishes the trust. If you are the grantor of a living trust, you would be the trustee while you are living, so you would have absolute control of the assets.
A successor trustee that you name in the trust declaration will administer the trust after your passing. You can account for possible incapacity when you have a living trust, because you can give the successor the power to administer the trust if you become unable to handle your own affairs.
Take Action Today!
Today is the day to end the procrastination if you are going through life without a plan. You can send us a message to request a consultation at our Cincinnati estate planning office, we can be reached by phone at 513-721-1513.