Depending on your situation, a living trust can be a valuable – even essential – estate planning tool. But as useful as a living trust can be, there are limits to what it can do. For example:
Probate Avoidance Isn’t Automatic
One of the main benefits of a living trust is that it can help you avoid probate. But simply drawing up and signing a trust doesn’t automatically ensure probate avoidance. Instead, you need to transfer into the trust any property that would otherwise be subject to the probate process.
A Basic Living Trust Won’t Save Estate Taxes
A revocable living trust can be used for estate tax planning, but this requires that special provisions, called an AB Trust, be added to the revocable living trust. Without these special provisions, your trust won’t have any effect on your ultimate estate tax bill.
A Living Trust Won’t Protect Your Assets from Creditors
When it comes to protecting your own property from creditors, a basic living trust is not enough. Instead, there are a number of other planning methods that, if used in a timely way, can help shield your assets. What a living trust can do is provide creditor, lawsuit, and divorce protection for your spouse and children after you pass away.
The key to estate planning with a living trust is to get the help of an experienced estate planning attorney. An experienced professional can make sure your trust provides the greatest possible benefit to you and your family. More than that, he or she can provide additional tools that pick up where a living trust leaves off.
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