Think a Revocable Trust Does It All? Let’s Clear That Up

Revocable trusts are often viewed as a straightforward, one-time solution to estate planning. While these trusts offer significant advantages, some common misconceptions can leave families vulnerable or unaware of potential gaps.

Here’s what a revocable trust actually accomplishes, and where its limits lie.

Myth #1: Revocable trusts protect assets from creditors.

This is a common misconception. Since you can change or revoke a revocable trust at any time, you legally still own the assets inside it. As a result, those assets are typically not protected from lawsuits or creditors.

If your primary goal is asset protection, consider alternatives like an irrevocable trust, which offers stronger legal safeguards.

Myth #2: A Trust Eliminates All Taxes

A revocable trust doesn’t eliminate taxes. You’re still responsible for income taxes on any earnings the trust generates, and its assets may be subject to estate taxes.

However, a revocable trust does offer essential advantages:

• Helps your estate avoid probate
• Bypasses costly court oversight
• Provides clear instructions for how and when your assets are distributed

So while it won’t erase tax obligations, it can make managing and transferring your assets much smoother for your loved ones.

Myth #3: A Trust Automatically Covers All Your Assets

This is a common pitfall, even for diligent planners: a trust only governs assets that are actually titled in its name. It doesn’t automatically cover everything you own.

That means you must transfer your bank accounts, real estate, and investments into the trust—otherwise, those assets aren’t protected from probate. You may also need a pour-over will to ensure anything left out is covered.

Without these steps, your estate may still go through probate, regardless of your intentions to avoid it.

When Used Correctly, a Trust Can Be Invaluable

A revocable trust gives you:

• Privacy (no public court proceedings)
• Efficiency (no probate delays)
• Control (you decide how and when your assets are distributed)

However, to reap those benefits, you must pair your trust with a comprehensive estate plan that addresses funding, asset protection, and tax planning.

Want Help Getting It Right?

A trust is a great start—but it’s not the whole story. If you’re unsure whether your current plan is working as intended, we’re here to help.