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This post is the second of a series in which I cover some common myths and misconceptions about estate planning. Of course, the more clear people are about the basics, the better they�ll understand how best to proceed with establishing an estate plan or reviewing and updating their existing plan.
A considerable number of myths exist about Estate Planning and, in particular, Revocable Living Trusts. Although increased media coverage and a higher level of consumer sophistication have helped debunk many of these misconceptions, I still encounter quite a few. In this post and each of the subsequent posts, I will highlight one or several of the myths and misconceptions that I regularly encounter and provide an educated rebuttal to them.
Myth: It is time-consuming and complicated to establish, fund, and manage a Revocable Living Trust.
Reality: A Revocable Living Trust takes little more time to establish than a Will. It does not have to be more complicated than a comprehensive Will, either. Furthermore, Trusts are generally quite straightforward to fund and managing your own trust assets is virtually identical to the way you manage them before establishing a Trust.
Myth: There are income tax implications and extra tax filing requirements when you establish a Revocable Living Trust.
Reality: Establishing a Trust for yourself does not trigger any additional income taxes, nor property taxes, nor any additional tax filing requirements.
Myth: You should be afraid to do a Trust because you�ll be locked into the decisions you make.
Reality: A Revocable Living Trust is revocable and amendable. You have the ability to revise your trust any time and as many times as you wish. As your personal, familial and financial position changes, it is quite easy and affordable to work with your estate planning attorney to revise your document so that it continues to reflect your current wishes. In fact, a good rule of thumb is to undergo an estate planning review at least every 3-5 years. In contrast, Irrevocable Trusts, which are not commonly used, generally cannot be changed; however, they can, in some instances, have benefits that outweigh the disadvantage of irrevocability.
This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.