As an entrepreneur, you’re likely to spend years working hard and building up your business so that you can retire comfortably when the time comes, as well as have assets or money available to support your family when you’re gone. However, while you no doubt concentrate seriously on increasing your wealth, how much time do you spend on investigating the best ways to protect it?
If you need to get serious about planning for the future, consider organizing a living trust. Also known as a revocable trust, this estate planning tool is similar to a will, because it sets out how you would like your assets to be distributed when you pass away, and can be amended.
However, a living trust differs in that it usually doesn’t pass through probate. Unlike a will, which has to go through the court system and can take a very long time to be finalized (as well as become incredibly costly for the beneficiaries), a living trust can help people to manage and distribute property without having to worry about court interference – as long as it is set up properly.
While these trusts provide a variety of benefits that are worth seriously considering, they can sometimes get a bad rep that they don’t deserve. Due to many myths that have been circling for years, lots of people who might find a living trust the best option for their needs don’t even look into them as a viable choice. If you’ve heard nothing but bad marketing about this type of legal document, read on for some common myths that need to be busted.
Myth #1: Trusts Are Only for Rich People
A lot of people mistakenly think that living trusts are only applicable for millionaires, but this just isn’t the case. Instead, a trust is perfect for anyone who wants the people they love to be able to avoid the pains of probate court, such as stress, costs, time, and hassle.
If a living trust is properly funded and set up, most heirs can avoid probate court entirely, and creators can know that their family is looked after in the way that they want. Keep in mind that probate court is generally involved for any estate over $150,000, so you don’t have to be even close to being a millionaire to have your heirs involved in it.
As well, keep in mind that even if you don’t have close family members you want to protect from the duress of court, there are still personal benefits to you if you set up a living trust. You can use one to organize for one or more people, or an organization, to manage your assets during your lifetime if you become unable to do it yourself due to incapacitation of some sort. As you create the living trust with your own specific conditions, you can ensure that all of your estate is handled in the way that you see fit, not the court.
Myth #2: Trusts Lead to “Trust Babies”
If you read the celebrity gossip magazines and websites then you have no doubt heard plenty of (rumored) stories of the children of famous stars who inherit large trusts and go off the rails with so much money at their disposal and no responsibilities. While a lot of wealthy people worry about setting up a trust in case this happens to their kids, this doesn’t have to be the case.
While a large fund can potentially lead to very spoiled children, living trusts can actually be used creatively. You can put certain conditions on how funds are used, and when. For example, you could set a limit on the age children need to be before they can access money, or how much heirs can receive as an allowance at one time.
As well, you could determine that trust money can only be used under certain circumstances or for specific uses, such as for health, financial emergencies, education, a property investment, or anything else that you feel would be suitable. You could even encourage your children to work hard by creating a matching trust fund that pays them according to how much money they earn independently.
Myth #3: Trusts Lead to Loss of Control
Another common myth that surrounds living trusts is that they lead to a loss of control over assets and wishes. This is because, with a trust, you take the property you own personally and transfer into the name of the trust, and then select how you want the assets in the trust to be distributed after you pass away.
This makes some people worry that since the trust then owns the estate, that they no longer have control over their assets.
In reality, while technically the trust is the legal owner for probate purposes, you are still the one to control the trust, or to determine who will in the event of your passing. Living trusts can be amended, changed, revoked, added to, or even canceled altogether if and when you like.
In addition, trusts enable you to have control even after you die. When you set up a detailed, well-crafted, and very specific living trust, you can actually tend to have more control over what happens to your assets than you might otherwise.