What are the negatives of a trust?

Switching assets to a revocable trust will not save income or estate taxes. While assets held in an irrevocable trust are generally out of reach for creditors, that is not true with a revocable trust. One of the downsides of a trust is the extra paperwork. For a living trust to be effective, you must ensure that ownership of all assets in the trust is legally transferred to you as a trustee.

If an asset has a title (real estate, stock, mutual funds), you must change the title to prove that the property is now owned by the Trust. Let's say you want to put your house in the Trust. To do this, you must prepare and sign a new deed to transfer the property to you as a trustee of the Trust. In the end, a little extra paperwork and recordkeeping is worth much more than the time and money that will be wasted on probate, not to mention the stress your family will have to go through to access your assets after you die.

Creating a living trust is not difficult or expensive, but it requires some paperwork. The first step is to create and print a trust document, which you must sign before a notary public. It's no more difficult than making a will. In most states, transfers of real estate to revocable living trusts are exempt from transfer taxes that are usually imposed on transfers of real estate.

However, in some states, transferring real estate to your living trust could result in a tax. See Real Estate in Transferring Titled Property to Trust.

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