Popular Myths About Living Trusts in Arizona
There is plenty of misinformation online and offline when it comes to the subject of living trusts. Discuss living trusts with enough people and you will even stumble on some bald-faced lies. Let’s separate living trust myths from fact.
Myth 1: Creating a Revocable Living Trust Bypasses the Entire Probate Process
Revocable living trusts create the potential to sidestep probate. However, there is no guarantee you will be able to completely avoid the probate process. If you are intent on having your estate bypass probate, it is not enough to simply establish a revocable living trust. It will also be necessary to fund the living trust. Be sure to consult with an estate planning attorney as a single mistake in the funding process or the failure to transfer property to the trust name will trigger the probate process.
Myth 2: I can Avoid the Estate Tax and Other Taxes With a Living Trust
Living trusts certainly permit assets held in the trust to be transferred outside of probate yet trust assets are usually considered a component of the taxable estate. Therefore, trust assets are accounted for at tax time.
Myth 3: Putting Money in a Living Trust Opens up Eligibility for Medicaid
Some people think they can void “spending down” their assets to qualify for Medicaid by putting money in a living trust. Though this might seem like a creative roundabout means of qualifying for Medicaid, it won’t work. The bottom line is if the assets still remain accessible, they will be counted as financial resources in the context of eligibility for Medicaid as well as other means of support. Therefore, a living trust will not help you bypass spending down your wealth before Medicaid will pay to cover the cost of care in a nursing home.
Myth 4: Living Trusts Safeguard Assets Against Creditors
Though it would be nice if creditors were unable to pursue money placed in a living trust, this estate planning tool does not serve as a safe haven for money that should be used to pay debts. Even if your money is transferred to a living trust, you retain full control over the funds. You can access trust assets so living trusts provide no protection against creditor claims.
Myth 5: Living Trusts are the Sole Means of Dealing With a Disability
Those who create and fund their living trust will not have to appoint a conservator in Probate Court for asset management if they become disabled. Most people dislike conservatorships as they are generally revered as an invasion of privacy. There are other ways to manage assets in the event of a disability. It is possible to name a trusted individual an “agent”, providing him or her with durable power of attorney. This legal power provides the agent with the ability to handle your assets. This way, if you become incapacitated, you won’t have to strictly rely on a living trust to ensure your assets are handled as you desire.
Myth 6: Living Trusts Ultimately tie up Assets in Probate
Though it has taken several years for particularly complicated estates to settle, such estates are the exception to the norm. Do not let a fear of the probate process stop you from establishing a living trust or meeting with an estate planning attorney. A savvy attorney will establish your living trust and steer your estate planning process to minimize your exposure to the time-consuming probate process. This professional will do everything possible to minimize delays and interference to ensure your loved ones are provided with their inheritance.
Click here to find out why you need an estate plan.