The first question clients often ask is, what is a revocable trust and do I need one? You need to know the benefits before deciding if a revocable trust is for you. You also need to know the limitations of having a revocable living trust—what a trust can’t do—to know whether it’s right for you.
This is a list of 3 common misconceptions to help guide you in your estate planning.
- Will Protect My Assets From Creditors
- Will Save on Taxes
- Not Rich Enough to Have a Trust
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A revocable living trust will protect my assets from creditors. A revocable trust will not protect you from creditors by the simple fact that it is revocable. To truly protect your assets from creditors, you need to put them into an irrevocable trust—not a good strategy unless you want to give your assets away. One strategy that may help protect your personal assets from business creditors is to form an LLC.
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A revocable trust will save on taxes. A revocable living trust does not have a tax benefit for the same reason that it doesn’t protect assets from creditors. The tax treatment of revocable living trusts is essentially the same as if the property was not in the trust. This means that capital gains are still your responsibility if generated by assets in the trust, and assets in the trust still count in calculating any estate tax liability.
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I’m not rich enough to have a trust. This is an extremely common misconception, that a trust will help those with more money and property. But since the trust doesn’t help with taxes or asset protection, there is no greater benefit as wealth increases. The main benefit of a revocable living trust is to avoid probate. So those with smaller estates may be the ones most in need of trust planning because their dependents can least afford to incur the costs and delays of probate.
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Understanding that a revocable living trust will not protect your assets from creditors or save on taxes are an important consideration in determining whether one is right for you. Revocable living trusts are also not just for the wealthy and may save your loved ones the expense and hassle of probate in the future.
Knowledgeable | Practical | Compassionate
At Eastside Estate Planning we focus exclusively on estate law and offer reasonable flat fees, depending on your individual needs. With 10 years of legal experience and an advanced tax degree, Robert is an expert at explaining complex estate planning concepts simply and advising his clients to make the best decision. Interested in learning more about our services?
Visit our website for more information, or schedule a free consultation with Robert to receive a personalized quote.
Service Areas:
Eastside Estate Planning is dedicated to providing estate planning, last will, and trusts services to individuals and families in the following areas:
Bellevue | Redmond | Monroe | Duvall
If you reside in any of these locations and are in need of professional estate planning assistance, we are here to help. Robert is committed to delivering personalized and top-quality estate planning solutions to clients within these cities. Contact us today to discuss your estate planning needs and secure the future of your assets and loved ones.
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