Myth #4 - Everybody needs and will benefit from having a revocable trust.
Despite what is repeatedly stated by quite a few popular financial gurus, not everyone needs or will benefit from having a revocable trust. A revocable trust is generally not cheap to form and not always easy to fund. In many instances, clients will not really have a want or a need for a trust to continue for the benefit of his or her beneficiaries after he or she dies.
Often clients will ask to form a trust, because they believe they need one, and then request that at death the assets in the trust be divided among their children and paid outright. This situation is one which doesn't necessarily need a trust. There is no creditor protection or tax benefits from setting up a trust. Yes, probate may be avoided for some assets, but the costs associated with setting up the trust, and the time needed to fund the trust just does not make sense when all assets are immediately distributed outright to the beneficiaries. The cost does not outweigh the benefit in these situations.
Revocable trusts can be very beneficial in the right situation: you have a special needs beneficiary you will be providing for, you have a child in a tenuous marriage you fear will end in divorce, you have a child with addiction issues, or one who is just not that great with managing money. These are all situations where your trust can hold and protect funds into the future to help this child or children you have concerns about. They are also very useful in a blended family situation where each spouse has kids from prior relationships and they want to ensure that their biological children are not written off if they happen to die before their spouse. A trust can provide for that surviving spouse, while still safeguarding funds for those children in a way that a surviving spouse cannot change.
For this reason, we like to take the time to get to know our clients’ intentions and the reasons behind a desire to have a trust. In some situations, a trust is absolutely the right fit for a client and in other situations, it just doesn’t make sense. Rest assured, we will not try to sell you something you cannot use, will not benefit from or do not understand.