4 Myths About Living Trusts

A Living Trust is a fictitious entity that gains title to your assets and estate. You, a spouse, or trusted relative can be named trustee. The trustee is responsible for anything that concerns the assets including the distribution of finances and the selling of real estate and property. If you have appointed yourself the trustee, upon your death an approved successor will take over the title.

Many people assume that a Living Trust is their best option. While it may work for some people, it is important to review all of your options. There are many misconceptions about them. When preparing your will, you should be aware of the four common myths about this practice.

1. Often people have heard that a Living Trust is more financially efficient and quicker than the time consuming probate process. Although there are legal and court fees involved in probate, Trusts will encounter comparable costs. Transferring assets into it takes considerable time and will cost money. And if not done in a timely manner, any assets not included in this practice at the time of death will be forced to go through probate. Contrary to popular belief, Living Trusts are still subject to taxation. In states like Louisiana, they are considered as part of the owner’s income. It also remains a part of the estate, which will be liable for further taxes after the settler passes.

2. It is commonly assumed that Living Trusts are the best way to prevent interdiction of an incapacitated person. If a person is deemed either mentally or physically unable to sufficiently handle his or her estate affairs through a trial, the court can pass judgment on who can rightfully make such decision on his or her behalf. Although it automatically gives right to a trustee successor, you may also appoint an estate planning attorney. For example, Louisiana allows the power of attorney to assume decisions regarding the deceased’s assets, which in many cases is a more affordable option than the other practice.

3. Probate is not always the worst way to go when estate planning. People have been told horror stories of the excessive fees and years it can take for action to be taken with an estate. But in states like Louisiana, the process is fairly painless and can often times cost the equivalent or less to that of a Living Trust. Probate fees here are lower than other states, and now there is an option of having an independent administrator take over rather than the timely process of dealing with an executor who must perform all duties through the court system beforehand.

4. Living Trusts are not as private as you might think. Some of your assets will be kept private, but real estate must be recorded in conveyance records. Banks can also request copies of its agreement, which means your information is passing through more hands than you might think. If you’ve considered opening a such a trust while estate planning, your attorney can help you make the most cost efficient and effective decision.