There are a few misconceptions about living trusts. Some people believe that living trusts are the best way to save on estate taxes. However, a living trust is only one technique which helps people with large estates save taxes. Additionally, a living trust will not prevent creditors from reaching your assets during your lifetime.

Another misconception is that transferring assets to a living trust automatically allows you to qualify for Medicaid; it may not. Furthermore, a living trust will not prevent a beneficiary or an heir from challenging the validity of your living trust should they claim that you were incompetent when it was drafted.

Finally, a living trust will not save you on income taxes and, after your death, the trustee must file a separate tax return each year the trust is in existence, which may further add to the expense of the living trust.

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