Trusts can be a great estate planning tool, but they are not a mandatory part of a plan. If you want to include one in your estate, you should make sure that you understand them and learn as much as you can about how they work.
This includes making sure you understand some of the false claims made about trusts. According to the National Consumer Law Center, it is common for some people to push trusts onto seniors by telling them a trust will do things it cannot.
Tax benefits
Unless you put together a tax-specific trust, a trust will not offer you any major tax benefits. You should not create a trust with the sole intention of avoiding or lowering taxes because it is not going to help with those things.
Credit protection
Another common sales tactic is to say a trust will protect you against creditors trying to collect a debt. A trust will not allow you to hide assets from creditors who have the right to them through a legal agreement, such as a lien.
Avoid probate
While it is true trusts do not have to go through probate because you handle the details before your death, they will not prevent your estate from having to go through the process. You may have other assets that will require the probate process.
Only need a trust
A trust alone is not an estate plan. You will still need other documents as part of your plans, such as a power of attorney or medical-related documents. You also likely still need to have a will because the trust cannot handle every detail.
A trust can be a wonderful addition to your estate, but make sure you know the truth about what they can and cannot do.
