A living trust, also called a revocable living trust or an inter vivos trust, gives you the ability to make post-death property transfers much more easily than you would if that property had to go through probate. While living trusts also allow for other benefits, there are many commonly held misperceptions about these devices floating around out there. Here is a quick list of some of the more commonly believed living trust myths.
Because I have a living trust I won’t have to pay estate taxes.
Not only is this false, but if you rely on this myth you can seriously damage your estate planning and asset protection efforts. While living trusts don’t automatically allow you to avoid with gift, or generation-skipping transfer taxes, provisions included in your living trusts by qualified and experienced estate planning attorneys can ensure that you take full advantage of strategies to minimize or eliminate such taxes.
I can distribute my property through a living trust instantly after I die.
While a living trust allows you a more efficient way of transferring your property to your beneficiaries after death, it is not an instantaneous transfer. The trustee has to be sure to account for any debts, taxes, and other issues that might impact his or her ability to transfer the property. All of this takes some time, but is frequently much less costly and quicker than such transfers through the probate process.
Because I have a living trust I don’t need a will.
Living trusts are great, but they generally don’t operate alone. You should also create a so-called pour-over will if you have a living trust even if the sole purpose of the will is to have any property remaining in your personal possession transferred to the trust. In California, a will is the document in which you nominate the person who will be the guardian of any minor children you may have.