Seven Myths & Truths about Living Trusts

We posted this blog post many years ago, but, it is worth repeating.  We often get questions from clients and colleagues who are confused about what exactly a Living Trust is and the advantages and limitations of incorporating a Living Trust in an estate plan.

A “Living Trust”, also known as a “Revocable Trust,” often is advertised as a way to avoid probate and quickly transfer assets to family members upon death. However, there are many misconceptions about Living Trusts:

Myth 1: A Living Trust will avoid statutory Probate Court fees.

Truth 1: The assets in a Living Trust still are considered part of your gross taxable estate and therefore are subject to statutory Probate Court fees.

Myth 2: A Living Trust will reduce estate taxes.

Truth 2: The assets in a Living Trust still are considered part of your gross taxable estate; therefore, a Living Trust does not reduce your estate tax bill.

Myth 3: A Living Trust avoids the need to file a Connecticut Estate Tax Return.

Truth 3: Even with a Living Trust, a Connecticut Estate Tax Return must be filed with the Probate Court.

Myth 4: A Living Trust will protect assets from creditor claims and lawsuits.

Truth 4: Assets in your Living Trust are available to your creditors while you are alive.

Myth 5: A Living Trust protects your assets in the event long term care expenses are incurred.

Truth 5: A Living Trust provides absolutely no protection of assets if long term care is required; assets in your Living Trust still are considered owned by you.

Myth 6: The Probate Court can be completely avoided with a Living Trust.

Truth 6: Some involvement with the Probate Court cannot be completely avoided in Connecticut; at a minimum, a Connecticut Estate Tax Return must be filed with the Probate Court even if all of your assets are in the Living Trust.

Myth 7: Everyone’s estate plan should include a Living Trust.

Truth 7: A Living Trust is not necessarily for everyone. As with every estate plan, a Living Trust should be used only if it is the best tool to meet the specific needs of you and your family.

Facebooktwittergoogle_plusredditpinterestlinkedinmail