Where People Get Confused About Wills and Trusts

This is one of the biggest areas of concern and ambiguity when I first talk to someone about estate planning. And when I explore what they might know about the difference between a Will and a Trust it is clear there is a great deal of confusion in their minds. While every person and situation is different, there are some common areas that would be helpful to clear up and give you some more clarity between the two and how they work.

This is also one of the cases where the “internet” and “search engines” can contribute to the confusion. There are a lot of “experts” that have surfaced with the massive adoption of the internet…everyone knows everything about everything. I can only wish this was true…instead, we tend to get too much “incorrect” information. When it comes to the law, there are some key points that are important to point out to try and cut through all the  noise for you.

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."

Here are some of the myths that exist in the market…

• Myth…If you have created a will, it is unlikely that your family will need to go through probate court after you pass away. A will does not protect your estate from probate, as many people mistakenly believe. A fully funded revocable living trust is the most appropriate estate planning tool for probate avoidance.
• Myth…If you do not have enough assets in your estate to pay the federal estate tax, an estate plan is not needed. Many people think that estate planning is only for the wealthy. There are many other aspects involved in estate planning besides the distribution of assets…such as children, family treasures, wishes, and directives.
• Myth…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 the case. If the trust is written properly, it can be amended and revoked easily by you as its creator.
• Myth…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 not the case.

There are many other myths surrounding wills and trusts…we will talk about more of these in future posts. Hopefully this gives you some further insights into a few of the issues that people are curious about and often have a misunderstanding about.