Trusts are estate-planning tools that are often misunderstood by those who are starting to plan their estate. When people misunderstand trusts, they may dismiss them as an option without appreciating the benefits that they could have. Moreover, they may use them without realizing that another estate-planning tool would be more beneficial in their situation.
If you are starting to plan your estate, it is important that you approach the process from a place of knowledge and understanding so that you are able to make informed and confident decisions about your legacy. The following are some of the most common misconceptions about trusts.
You have to be a billionaire to set up a trust
Probably the biggest misconception about trusts is the idea that a person needs to be extremely wealthy to have any use for one. This is not the case. While those with a high net worth can benefit from setting up trusts, trusts are generally needs-based, rather than wealth-based. If you have a certain situation or goal in your estate plan, a trust may be able to make it work in the most financially efficient way.
Trusts require a lot of maintenance
No one wants to spend a huge amount of time and money setting up and maintaining their estate plan. For many estate planners, the question of whether to set up a trust comes down to the question of whether a trust will be less expensive than the cost of probate, which is often the case.
A person has no use for a trust if they have a will
It’s also common to believe that a trust is designed to replace a will and vice-versa. Trusts are designed to complement a will, not replace them.
If you are starting to plan your estate, make sure that you understand the benefits of creating a trust.