Myths About Trusts You Can't Afford To Believe
A living trust is a legally binding document that you create at some point during your lifetime. Much like a will, a trust allows you to designate who inherits your assets when you die. The difference between a will and a trust is that a will only goes into effect after your death and after it has been entered into probate. If you are considering a living trust, there are some misconceptions about them that may end up costing you more money in the long run.
Living Trusts Only Benefit the Wealthy
One of the biggest myths when it comes to living trusts is that they only benefit those who are wealthy. The fact is that trusts are constantly being set up by people from an array of financial backgrounds. While it is true that wealthy people do set up trusts, so do those with average incomes. Anyone who wants to ensure that their money will be managed according to their wishes can benefit from a living trust.
Living Trusts Are Extremely Complicated
Many people are under the assumption that trusts are complicated to set up. The fact is that trusts can be simple and easy. For the most part, the basic aspects of a living trust are fairly simple and straightforward. If you need help setting up your living trust, an estate planning attorney can help with the process.
Living Trusts Eliminates the Need for a Will
While it is true that having a living trust is funded through your assets while you are still alive, it is also important to have a will as well. A living will is designed for you to establish guardians for your minor children, establish a representative for your probate estate and include assets that you may have forgotten to include in your living trust.
Living Trusts Allow You to Avoid Income Taxes
Living trusts do not allow you to avoid – or even save money – on income taxes while you are still living. You will still be taxed according to income that may be earned by your assets and must be reported on your tax return. After your death, it is not required that the trust pays income taxes on any amount that is paid to beneficiaries of the trust. However, the beneficiaries of the trust must pay taxes on any money they receive from the trust.
Living trusts are an ideal way for you to build financial security. However, it is important that you understand the myths associated with trusts in order to avoid unnecessary financial costs. For more information, contact a professional such as James M Snow.