10 Living Trust Myths (Debunked)

November 28, 2023

Revocable living trusts are powerful—but they attract persistent myths. Here are the ten I hear most, with straight answers and practical steps you can use today.

Myth 1: “A living trust is only for the wealthy.”

Reality: The primary benefits—avoid probate, maintain privacy, and provide incapacity planning—apply at many asset levels. If you own a home or want someone to manage finances without court involvement if you’re ill, a trust is practical, not luxurious.

Myth 2: “A trust automatically reduces taxes.”

Reality: A standard revocable trust usually does not reduce federal estate or income taxes by itself. It’s a management and transfer tool. Tax‑focused trusts exist (e.g., ILITs, SLATs, charitable trusts), but those are irrevocable and purpose‑built.

Myth 3: “If I make a trust, I don’t need a will.”

Reality: You still need a pour‑over will to (1) nominate guardians for minor children and (2) funnel stray assets into the trust. A will is the safety net; the trust is the main engine.

Myth 4: “Funding is optional.”

Reality: Without funding, the trust doesn’t own anything and can’t avoid probate for those assets. Funding means recording deeds, retitling brokerage accounts, and aligning beneficiary designations. No funding, no benefit.

Myth 5: “Trusts are complicated to use day‑to‑day.”

Reality: While you’re alive and well, you’re usually the trustee. You use your accounts and home as before. Banks and title companies typically rely on a certificate of trust, not your full document, for routine matters.

Myth 6: “A trust eliminates all court involvement.”

Reality: Properly funded trusts avoid probate for trust assets, but trustees still have duties: notices, prudent investment, paying valid debts and taxes, and making distributions. That’s administration, not courtroom litigation.

Myth 7: “Trusts provide asset protection for me, the grantor.”

Reality: A revocable trust provides little or no protection from your own creditors while you’re alive because you retain control. Some irrevocable structures can provide protection under specific laws, but that’s different planning.

Myth 8: “My kids get everything faster with a trust, no matter what.”

Reality: A well‑funded trust usually speeds things up, but the trustee still gathers information, pays bills, and follows your distribution instructions. “Fast” should not mean “sloppy.” Good records and communication matter.

Myth 9: “Trusts always get a double step‑up in basis.”

Reality: Basis outcomes depend on design and titling. Revocable‑trust assets are typically includible in your taxable estate and receive a step‑up at your death; a second step‑up at the survivor’s death depends on ownership structure and state property law. Don’t rely on slogans—structure with intent.

Myth 10: “One trust fits every family.”

Reality: Blended families, special‑needs beneficiaries, multiple properties, or business interests require tailored clauses. Use a state‑specific, lawyer‑crafted template and adjust for your facts—or consult counsel for complex needs.

Practical action plan (to replace myths with a working plan)

Create the trust (state‑specific, lawyer‑drafted language).
Fund it: deeds recorded; brokerage retitled; personal property assigned.
Coordinate retirement and insurance beneficiary designations.
Sign a pour‑over will (guardians + safety net).
Store the binder with a certificate of trust and a simple asset list for your successor trustee.
Review after major life events or a move across state lines.