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Everyone needs a trust... and other myths

"You need an estate plan." It is a warning many people hear, but when it comes to estate planning, determining what is best for you and your family can be difficult. This is especially true when you are considering a trust.

There is a lot of misinformation about trusts floating around out there. Let us clear up four of the most common myths about trusts.

Myth #1: Everyone needs a trust

Like most things in life, no estate solution is a one-size-fits-all proposition. Trusts are right for some families, but not all. For some people, a trust is not necessity or simply does not make sense due to their financial situation and the assets they currently possess. In addition, forming a trust without a real need or purpose can amount to an unnecessary expense.

Myth #2: Trusts are only for rich people

When you think about a trust, you may picture someone rich or famous, but the truth is, trusts are not just for the wealthy. Those with more moderate incomes can benefit from a trust, and it can even help them protect and preserve limited assets.

While there are a few upfront costs associated with a trust, they can actually be offset by expenses you'd have later on without one. Also, if one of your family members agrees to be the administrator of the trust, then the actual administration is quite inexpensive.

Myth #3: Trusts are a lot of work

The third myth about trusts is that they require a lot of work to set up. While it is true that the assets you plan to put into your trust will need to be moved into the trust at some point, this is not as difficult as it sounds.

One easy way to handle this is by using an easy method such as transfer-on-death or payable-on-death. This means the assets will be added to the trust without having to change the ownership of the asset when setting up the trust.

Myth #4: Trusts are only helpful after death

Many people believe that a trust is useful only for planning in anticipation of probate or estate administration. They associate a trust with the death of a person, but that is not actually true. Having a trust in place before death can be important if you become incapacitated before your death. By having the trust in place, it can help you manage your financial obligations when you are unable to make important decisions or give direction.

All myths aside, trusts can be a good estate planning option for many people. The best way to determine whether a trust is right for you, is to have a meaningful conversation with a professional. Don't take legal advice from the internet. And definitely don't try to "do it yourself" to save money, because mistakes could cost even more in the end.

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