When it comes to estate planning, people tend to have misconceptions about living trusts, many of which stem from secondhand accounts from unreliable sources. Below, I discuss three of the biggest myths about living trusts:
“Only rich people need trusts.”
By far the most common misconception I hear from clients is that they do not think they need a trust because they have minimal assets. In reality, a person’s cumulative wealth is irrelevant in determining whether or not that individual is a good candidate for a living trust.
A trust is always recommended for anyone who owns real property, as in California, upon death, any property that is not held in trust must be administered in probate court. A trust may also be appropriate for individuals who have assets other than real property, depending on their circumstances.
“Instead of creating a trust, I can pass my house down to my children by adding their names to title.”
Although adding your children to your property as joint tenants may seem like a simple and convenient option to transfer assets, it carries a number of risks, such as the potential for multiple probate proceedings and joint liability, along with serious tax disadvantages. For these reasons, a trust is always recommended for real property transfers.
“A living trust will protect me from lawsuits and creditors.”
The primary purpose of a trust is to avoid costly and time-consuming probate proceedings. Because the trust is revocable, meaning the trust creators retain full control over the assets during their lifetime, it does not provide third-party liability protection.
In order to avoid the pitfalls of these misconceptions, it is important to consult with an experienced estate planning attorney to determine whether or not a trust is right for you.
Allyson S. Heller is a licensed attorney at the Law Offices of Tony J. Tyre, ESQ, APC. For more information, please contact our office at (626) 858-9378, or firstname.lastname@example.org.