Certain myths exist about trusts that residents in Massachusetts and around the world may believe. Even celebrities such as Sting and Philip Seymour Hoffman have let myths about trusts dictate estate planning decisions. In the case of Mr. Hoffman, the choices eventually led to tax and estate problems that his children now face.
One thing that it appears both celebrities believed is that trusts create spoiled or lazy heirs. Creative trust construction diminishes the impact of a “free ride” on heirs, though. Trusts can be limited so they cover certain expenses or expense types or come with conditions such as gainful employment. One idea for those looking to motivate strong work ethic in heirs might be to set up trusts that disburse money in proportion to the earnings of or work completed by heirs.
Another myth that many people believe about trusts is that they are only necessary for the wealthy. Trusts reduce probate concerns for any heirs and can protect assets of any value from taxes or, in some cases, creditors. Trusts also put control in the hands of the person who created the trust, allowing individuals to shape their own legacies.
Some people believe a trust involves loss of control. That is true in some cases, which is why it’s essential to understand what type of trust you are dealing with. A revocable trust, for example, can be cancelled or changed by the creator at any time.
Trusts don’t mean that you leave all assets to children. In many cases, individuals use trusts to set up long-term funding for charitable organizations or other entities. Finally, many people believe a trust is unnecessary if there is a will in place. Trusts cover issues that wills don’t, and estate planning documents can work together to provide the largest possible coverage for your wishes during end-of-life or after death.
Source: Forbes, “Philip Seymour Hoffman and Sting Highlight Five Myths About Trusts” Danielle and Andy Mayoras, Jul. 28, 2014
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