Monday, July 28, 2014
Recently, Philip Seymour Hoffman declined to take the advice of his attorney who advised him to create a trust. Hoffman said he did not want his three children to be “trust fund kids.” Because of Hoffman’s aversion to proper estate planning, his 34 million dollar estate faces a huge tax bill and other problems that could have been avoided if he listened to the legal and financial advice he was given. Similarly, Sting expressed a similar sentiment and did not want his children to have a trust fund.
While Sting and Hoffman may have good intentions, their beliefs highlight the myths surrounding trusts, especially revocable living trusts. Provided below are the most common myths:
- Trust Funds = Spoiled Children. While a large trust fund can lead to spoiled children, it doesn’t have to. Trusts can help the creator do the opposite. A person who sets up a trust with an attorney can craft language to tie the distributions to conditions or events, based on that person’s values and goals, this way money can be passed based on how grantor’s see fit.
- Trusts are for the Rich. Trusts are for anyone who wants their heirs to avoid the expense, hassle and stress of probate court. A living trust also helps by setting up one or more people to manage their assets during their life if they become incapable.
- Losing Control. In the case of a revocable trust, it can be changed, amended, or canceled altogether. Trusts also foster control even after someone passes away.
- I Have a Will. Wills, unlike trusts, have to pass through probate court to work. This means they are public record, more expensive, and difficult to administer. They can also lead to family fighting. With trusts, there are tax benefits with which wills and joint bank accounts cannot achieve.
- I Must Leave All My Money to My Kids. Anyone can set up a trust and name whomever they want to receive their money, including charities, other family members, close friends, trusted employees, etc.
See Danielle and Andy Mayoras, Philip Seymour Hoffman and Sting Highlight Five Myths About Trusts, Forbes, July 28, 2014.