Myths

In addition to some of the advantages and disadvantages, lets examine a few ideas about Revocable Trusts:

Myth 1 - Revocable Trusts Eliminate Estate Taxes
Estate taxes are generally the same for a well-drafted Will. For estate and income tax purposes, the property in a revocable trust is treated as if it were the Grantor’s own property.

Myth 2 - Revocable Trusts Always Avoid Probate
Only if the Revocable Trust is fully funded does it avoid probate. Many times assets are found that were never transferred to the trust and some form of probate is necessary.

Myth 3 - Revocable Trusts Eliminate Professional Fees
Although a Revocable Trust eliminates the expense of a probate proceeding, there may still be administrative expenses. This is particularly true in an estate which exceeds the applicable exclusion (estate tax exemption) amount. If an estate tax return is required, then additional expenses will be incurred.

Myth 4 - Revocable Trusts Provide Creditor Protection
During the Grantor’s lifetime, creditors can file liens or claims against the trust assets.

Myth 5 - Revocable Trusts Eliminate the Need for a Will
A Will (called a Pour-Over Will) is still necessary to ensure that any assets not properly funded into the Revocable Trust during your lifetime are ultimately transferred to the trust. In addition, a Will allows you to nominate the guardian of any minor children.

Finally, opening probate with a Will that has few assets may still be beneficial to start the creditor claims period of 6 months without a probate proceeding, there is generally a 2 year statute of limitations.