Establishing a trust is a great way to protect your assets and ensure that your loved ones are taken care of after you pass away. However, there are some drawbacks to setting up a trust that you should be aware of before making the decision. A revocable trust will not save you any income or estate taxes. While assets held in an irrevocable trust are generally protected from creditors, this is not the case with a revocable trust.
Additionally, setting up a trust requires extra paperwork. To make sure that the trust is effective, you must transfer ownership of all assets in the trust to yourself as the trustee. This means that if an asset has a title (such as real estate, stocks, or mutual funds), you must change the title to prove that the property is now owned by the trust. For example, if you want to put your house in the trust, you must prepare and sign a new deed to transfer the property to yourself as trustee of the trust.
Creating a living trust is not difficult or expensive, but it does require some paperwork. The first step is to create and print a trust document, which must be signed before a notary public. In most states, transferring real estate to revocable living trusts is exempt from transfer taxes. However, in some states, transferring real estate to your living trust could result in a tax.
Overall, setting up a trust can be beneficial for protecting your assets and ensuring that your loved ones are taken care of after you pass away. However, it is important to be aware of the extra paperwork and potential taxes associated with setting up a trust before making your decision.