Trusts are powerful legal instruments utilized by people in a variety of circumstances. A trust is technically a separate legal entity from the trustor who creates it.
Quite a few people could benefit from the creation of a trust, but they may overlook these useful tools because they believe inaccurate information about trusts. The three misconceptions below might deter people from learning more about trusts and making use of them. What misconceptions lead people to underestimate the value of a trust?
Misconception 1: Trusts are only for the wealthy
Many people associate trusts with trust fund babies or beneficiaries of intergenerational wealth. Those who have millions of dollars in assets often use trusts to protect their resources and loved ones.
However, they are not the only people who may benefit from funding trusts. Trusts are also useful for those who live middle-class lifestyles and those with family members in difficult situations. Trusts are valuable in a wide range of different circumstances.
Misconception 2: Trusts are always irrevocable
People often think that trusts are ironclad or irrevocable after their creation. Irrevocable trusts do provide benefits, including protection from creditor claims. Despite what some people believe, there are also many types of revocable trusts that people can create and then adjust occasionally as their circumstances change. Those who know they may have to make adjustments in the future could still theoretically create a trust and update it according to their future needs.
Misconception 3: Trusts are only for estate planning
Many people fall victim to the idea that a trust is only useful for those preparing to die. Trusts can be powerful testamentary instruments. They can give the trust or the power to create a very specific legacy that persists for multiple generations.
Trusts are also useful for people as they approach their golden years. Trusts can help older adults qualify for Medicaid benefits and can protect them from collection activity when they live on a fixed income later in life. Trusts are also useful for successful professionals and business owners, as they can protect personal resources from lawsuits and divorce.
Learning more about trusts could help people in a variety of circumstances make use of these powerful legal instruments. A trust can be helpful for someone in a broad range of different personal circumstances.