COMMON MISCONCEPTIONS ABOUT WILLS AND TRUSTS
It is difficult to sort through all the confusion about estate planning documents and the probate process. You hear different and conflicting information from your neighbors, television programs and the internet. There are many frequently perpetuated myths about Will and Trusts circulating around. It is important to make sure you have your facts straight. If not, you may accidentally leave your family in a troublesome position. For instance, many people believe that if they have a Last Will and Testament prepared, their estate will avoid probate. This is incorrect. The primary purpose of the probate court is to make sure that a decedent's assets are passed to the proper heirs and beneficiaries. The Will serves as a statement to the court of the decedent's wishes with regard to where that person wants his or her assets to be distributed. The Will names chosen beneficiaries and the probate court makes sure that the named beneficiaries are the parties to receive the assets. In Florida, even with a Will, your heirs may be required to get a lawyer and go to court in order to receive their proper inheritance. Everyone should still have a Will, but additional estate planning, including the use of a Revocable Living Trust, is necessary to avoid the probate process.
It is also typical for people to think that they do not need to do any estate planning because they are not worth enough money. Many people think that if their estate is under $5,250,000, the amount of the Federal Estate Tax Exemption amount, then there is no need to do a Revocable Trust. That could not be further from the truth. Five million two hundred fifty thousand dollars ($5,250,000) is the amount that can pass to beneficiaries free of federal estate tax, but there are still many issues that may come up as a result of one's passing. Any amount of money, no matter how much or how little, will have to go through some form of probate without proper planning. As most people are aware, probate can be expensive and time consuming. Additionally, there are many other reasons to do proper estate planning. Estate planning documents are the best place to name a guardian for your minor children or a disabled child. They are also used to make arrangements for taking care of elderly family members or a surviving spouse.
Commonly, people are concerned that putting their property, especially their homestead, into a Revocable Trust will limit what they can do with the property during their lifetime. A properly drafted Revocable Trust is completely amendable and revocable during the lifetime of the person who creates it. Anything that you put into the Trust is under your complete control as Trustee of the trust. Therefore, you have no limit to what you can do with a property that is put into a Revocable Trust. You can sell the property, encumber the property, decide who you want to inherit the property and even change your mind and choose someone else to inherit it.
Another issue that is frequently asked about is that of filing a separate tax return for a Trust. Many people think that if you have a Trust, you have to file a completely separate tax return. A Trust is not a separate entity for tax purposes, therefore filing a separate tax return is not necessary. During your lifetime, you file the same individual or joint tax return that you are file now.
Lastly, it is usual for people to believe that once they complete their estate planning documents, they are all done and they never have to think about them again. This is definitely not the case. An estate plan is something variable and can change over your lifetime as the circumstances of your life change. This can be a change in your family situation, like a birth, death, or marriage. It can be a change in the kinds of assets that you own. It can also be a change in the state or federal laws. A proper estate plan is one that keeps up with the your life as it evolves over time. It is recommended that you review your estate planning documents with a professional every few years to make sure that nothing needs to be updated or changed.
The proper planning can make things easier and less expensive for your loved ones. Wills and Trusts are tools that can be extremely helpful in accomplishing your estate planning goals. Make sure that you ask a professional and do not fall victim to the misconceptions and incorrect information that is constantly circulating around.