Many individuals facing the decision of what to do for an estate plan find themselves choosing between the option of having a will or basic estate plan over a revocable trust.
While trusts have their appeal and many benefits do exist, many misconceptions also exist. Here are a few of these misconceptions that are common when it comes to revocable trusts.
Myth 1: Heirs Are Not Allowed To Challenge A Revocable Trust
One common misconception is that the deceased’s heirs are not able to attack a revocable trust. However, that is not always the case.
In fact, most jurisdictions do have laws that allow heirs to challenge a trust when they believe that it has been created under fraud or questionable circumstances.
It is not an easy case, but trusts can be challenged if appropriate.
Myth 2: Revocable Trusts Save Income Taxes
Taxes are often the main reason why people seek out revocable trusts over wills. However, not all taxes are exempt when it comes to trusts. In fact, income taxes are required if the revocable trust produces income during a tax period.
It is always recommended that the attorney assisting the grantor and beneficiaries advise on how to handle taxes, especially if income is expected to be produced from the trust property.
Myth 3: Creditors Cannot Reach the Trust Assets
Another myth is that revocable trusts protect the grantor’s assets from the claims of creditors. However, that is not the case.
The grantor does not avoid all responsibility from his or her debts after creating a trust. In fact, the creditors can reach the assets during the grantor’s lifetime and even appropriately file a claim with the trust, if needed.
The best way to protect against creditors is to have an irrevocable trust.
Myth 4: The Grantor No Longer Has Control over the Property
One major misconception that exists involves control over the trust property. Many clients believe that once the trust is created, they will lose control over their property.
That is not the case with a revocable trust. If the grantor creates a revocable trust, he or she can continue to maintain control over his or her assets and can manage them appropriately.
Just because the property is transferred into the “name” of the trust, does not mean the grantor no longer “controls” that property.
Myth 5: A Trust Document Is All That Is Needed
Many grantors believe that they only need a living trust document and no other estate documents. Keep in mind that an estate plan involves much more than control over personal property.
A trust will not deal with what happens with the grantor’s children if they are minors when the grantor dies. A will document will be needed to determine guardianship over any living minor children.
Further, a living will may be needed for medical decisions, including a do not resuscitate clause.
Further, a power of attorney document may need to be created to appoint a specific individual who can make financial or legal decisions on behalf of the grantor during his or her lifetime.
All of these documents are needed to make a complete estate plan.
Myth 6: Trusts Are Not Enforceable
One misconception involving trusts are that trust documents, revocable or irrevocable, are not enforceable in court.
A trust document is legally binding and does allow for protections to the grantor with respect to his or her property and wishes for what happens to his or her estate upon death or before death.
These documents are always enforceable, and a probate attorney can guide the grantor through understanding the process, as well as beneficiaries who have concerns over how the document can be upheld.
Contact Brian M. Douglas, LLC Today
If you are not sure you need an attorney, you can always come in for a consultation to discuss your situation. Please contact our office if you or someone you know has recently been appointed personal representative of a loved one’s estate and has questions about what to do next.
Call us today at (770) 933-9009 to schedule your consultation with a Greater Atlanta area probate lawyer today.