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The Flip Side: What to Watch Out for with Revocable Trusts
Revocable trusts offer big benefits, but they’re not perfect for everyone. Before jumping in, consider these potential drawbacks.
**Upfront Costs**: Setting up a revocable trust costs more than drafting a simple will. You’ll need an attorney, and fees can range from hundreds to thousands of dollars, depending on complexity. Plus, transferring assets (like re-titling a house) might involve additional expenses.
**Ongoing Maintenance**: Trusts aren’t “set it and forget it.” If you buy a new car or open a new bank account, you’ll need to title those assets in the trust’s name to keep everything aligned. Miss this step, and those assets could still go through probate.
**No Tax Benefits**: A common myth is that revocable trusts save on estate taxes. They don’t. Since you retain control, the IRS treats trust assets as yours for tax purposes. Tax savings require irrevocable trusts, which are a different beast.
**Not a Shield from Creditors**: If you owe money, creditors can still come after trust assets during your lifetime because you control them. Protection from lawsuits or creditors kicks in only with irrevocable trusts.
So, is it worth it? That depends on your goals—privacy, avoiding probate, or managing incapacity might outweigh the costs for you. In our final post, we’ll help you decide if a revocable trust fits your estate plan.