If you are like a lot of people in the Seattle, Washington area beginning an estate plan, you have likely heard of revocable living trusts. A revocable living trust is an essential piece of many contemporary estate plans. Like other estate planning tools, living trusts will serve some specific purposes and will allow you and your estate some significant benefits.
There are, unfortunately, some commonly held myths about living trusts that you may have come across. While most of these myths are relatively harmless, it’s a good idea to understand why they’re not true. Having the right information about revocable living trusts will allow you to make much better choices when you go through the estate planning process.
Myth 1. If I create a revocable living trust I don’t have to worry about probate.
A revocable living trust is essential if you want to create an estate plan that focuses on probate avoidance. Yet creating a revocable living trust is not the only necessary step. Your trust will have to be properly funded in order for your estate to avoid probate. Funding a trust means transferring all appropriate assets into the trust’s name. Without a properly funded revocable living trust, the property left out will have to go through probate. Further, failing to transfer the property properly will also mitigate any potential probate avoidance benefits.
Myth 2. If I have a revocable living trust I don’t need a will.
While a living trust will allow you to make inheritance choices outside of your last will and testament, it doesn’t make a will and optional device. Your last will and testament affords you specific benefits and choices that you cannot accomplish through your revocable living trust.
For example, you can name a guardian for any minor children in your will. The guardian will take over parenting responsibilities should you die before the child becomes an adult. You cannot use a revocable living trust to nominate a guardian.
Myth 3. Once I create a revocable living trust I don’t have to worry about it anymore.
Managing a revocable living trust is something that requires regular activity. Like your car, your revocable living needs routine maintenance. To keep it functioning properly and to make sure you are getting the most benefit possible, you need to carefully review your living trust at least every three years. Further, if you acquire or dispose of trust property, you need to keep accurate records. Having a living trust with poorly kept financial details can be a significant problem, if and when you have to distribute trust property or have someone step in to manage the trust when you are incapacitated.
Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.