While it is not possible to dispel everything that people mistakenly believe about wills and trusts, a few things come up often enough that it is important to make sure you do not hold these mistaken beliefs.
It is not clear where some beliefs about estate planning get started, let alone how they continue to spread despite not being true. There are certain myths people believe that just continue to pass from one person to another, like wildfire. Perhaps it is the Internet where things that are not true can exist and be found over and over again for years.
In any event, some basic estate planning myths are so common that it is worth taking some time to correct them as TC Palm discusses in "Common misconceptions about wills and trusts."
These myths include:
- If you have created a will, it is likely that your family will still need to go through probate court after you pass away. A will does not protect your estate from probate, as many people mistakenly believe; in fact, it guarantees probate unless you’ve done other planning. A fully funded revocable living trust is the most appropriate estate planning tool for probate avoidance.
- Even if you do not have enough assets for your estate to pay the federal estate tax, an estate plan is still needed. Many people think that estate planning is only for the wealthy. It is not. Protecting assets from bankruptcy, divorce, judgment creditors, spendthrift children, and catastrophic medial events is a big part of estate planning that has nothing to do with the estate tax.
- People think they should not put property into a revocable trust because that will limit what they can do with the property. This is not true either. If the trust is written properly, it can be amended and revoked easily by you as its creator.
- Another common mistaken belief concerns the administration of a revocable living trust, while its creator is alive and managing it. Many believe that by creating a revocable living trust, they will need to file a second income tax return for the trust. This is also false.
Reference: TC Palm (May 1, 2018) "Common misconceptions about wills and trusts."