5 Living Trust Misconceptions That Could Destroy Your Estate Plan | Repair The Roof Podcast

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Ted Gudorf, an estate planning attorney, breaks down why simply creating a living trust isn’t enough—proper funding is essential. He walks through five common misunderstandings that often undermine otherwise solid estate plans, stressing the importance of aligning all estate documents so they work together seamlessly. Ted also underscores the need to keep plans updated as laws and personal circumstances change, while drawing attention to the role of privacy and the unique handling required for retirement accounts within an estate plan.

5 Living Trust Misconceptions That Could Quietly Destroy Your Estate Plan

You did everything right—or so you thought. The documents are signed, the binder is on the shelf, and the trust is complete. Except for one problem: your estate plan may still be broken.

A woman came into my office not long ago after her husband passed away. They had spent thousands of dollars on a professionally drafted, trust-based estate plan. On paper, everything looked perfect.

But when we examined how their assets were titled, the truth came out.

  • The house was still in their individual names
  • The bank accounts were untouched
  • The investment accounts never moved

Despite having a trust, we had no choice but to open a probate case anyway.

That process took nearly two years and cost the family more than $15,000 in legal fees and court costs. All of it was avoidable.

I see this story play out far more often than you might expect. And it almost always traces back to a handful of deeply misunderstood assumptions about living trusts.

Today, I want to walk you through five of the most dangerous living trust misconceptions—mistakes that can quietly unravel your estate plan if you don’t address them now.

Misconception #1: “Once the Trust Is Signed, the Work Is Done”

This is the most common—and most costly—mistake people make.

You sign the trust documents.
You leave your attorney’s office relieved.
You check “estate planning” off your to-do list.

But a living trust doesn’t work just because it exists.

A trust is simply a legal container. Think of it like buying a high-end safe and leaving your valuables on the kitchen counter.

Until assets are moved into the trust, it does nothing.

Funding a trust typically includes:

  • Retitling real estate into the trust
  • Updating bank and brokerage account ownership
  • Coordinating ownership and beneficiary designations

If this step is skipped, the trust may look impressive—but it won’t do its job when your family needs it most.

Misconception #2: “A Living Trust Eliminates Taxes”

This misconception shows up in almost every estate planning conversation.

Here’s the reality most people never hear:

  • A revocable living trust does not reduce income taxes
  • It does not eliminate estate taxes by itself
  • It is not a tax shelter

From the IRS’s perspective, assets in a revocable trust are usually treated the same as assets held in your own name.

That doesn’t mean trusts have no tax value. They can:

  • Preserve estate tax exemptions for married couples
  • Create tax-efficient structures for beneficiaries
  • Work alongside advanced planning strategies

But tax reduction is not the primary purpose of a revocable living trust.

Misconception #3: “If I Have a Will and a Trust, I’m Fully Covered”

Many people assume having both documents provides extra protection.

It only works that way if they are coordinated.

When you have a revocable living trust, your will is typically a pour-over will. Its role is limited. It exists to catch anything left outside the trust and move it into the trust after death.

Important details often overlooked:

  • Pour-over wills still require probate
  • Executors and trustees must work together
  • Conflicting appointments can cause delays and disputes

An estate plan is not a stack of documents. It’s a system. Every piece must align, or the entire plan can stall at the worst possible moment.

Misconception #4: “Once Created, a Trust Never Needs Updating”

This assumption quietly undermines countless estate plans.

When older trusts are reviewed, common problems include:

  • Trustees or beneficiaries who are no longer living
  • Family relationships that have changed
  • New grandchildren never accounted for
  • Provisions based on outdated laws

Your life changes. The law changes. Your trust must change too.

A general rule of thumb:

  • Review your plan every one to two years
  • Review immediately after major life or financial changes

An outdated trust can create confusion, conflict, and unintended outcomes.

Misconception #5: “A Trust Automatically Guarantees Privacy”

Privacy is one of the most attractive benefits of a trust-based plan.

But it only works if the trust is fully implemented.

If assets remain in your individual name at death:

  • Probate may still be required
  • Estate details become public record
  • Beneficiary information may be exposed

Privacy also depends on incapacity planning. Without proper powers of attorney, families can be forced into public guardianship proceedings.

True privacy requires planning for both death and disability.

One Final Issue Too Important to Ignore

Even with a fully funded trust, one major asset category operates differently.

Retirement accounts are controlled by beneficiary designations—not by your trust.

These accounts include:

  • IRAs
  • 401(k)s
  • 403(b)s

If they are not coordinated properly with your estate plan, your beneficiaries could face unnecessary tax consequences.

This mistake alone has cost families tens of thousands of dollars.

Final Thoughts

Living trusts are powerful tools—but only when they are properly understood, maintained, and coordinated.

To recap the five misconceptions:

  • A signed trust means the work is finished
  • A trust automatically eliminates taxes
  • A will and trust always work seamlessly together
  • Trusts never need updates
  • Privacy happens automatically

None of these are true.

A strong estate plan isn’t about paperwork. It’s about clarity, coordination, and protecting the people you care about—without unnecessary cost, delay, or exposure.

Transcript: Prefer to Read — Click to Open

Ted (00:00.078)

A came to me last year. Her husband had passed away. They had spent thousands of dollars on a beautiful trust-based estate plan. But when we looked at how their assets were titled, nothing was in the trust. Not the house, not the bank accounts, not the investment accounts. Everything was still in their individual names. So despite having a trust, we had to open a probate case anyway. It took two years and cost the family over $15,000 in legal fees and court costs. All of that.

could have been avoided if they had simply funded the trust when they created it. You just sign your living trust documents. You feel relieved. You think you’re done. But here’s what most people don’t realize. Just signing a trust doesn’t mean your estate plan is complete. In fact, I’ve seen hundreds of families end up in probate court even though they had a perfectly good trust sitting in their filing cabinet.

Today I’m going to walk you through five dangerous misconceptions about living trusts that could derail your entire plan if you don’t address them now. I’m Ted Gudorf and I’ve been practicing estate planning and elder law here in Ohio for over 35 years. I’ve helped thousands of families protect their assets and avoid probing. More importantly, I’ve seen what happens when people make these mistakes.

So let’s make sure you don’t become one of these cautionary tales. The first misconception is thinking that once you create your trust, all of the work is done. You sign the documents. You shake hands with your lawyer. You drive home feeling accomplished. But here’s the problem. A trust is just a legal container. It’s like buying a safe and leaving all of your valuables sitting on the kitchen counter.

The safe doesn’t protect anything until you actually put your assets inside it. We call this funding your trust or asset alignment. And it’s the single most important step that gets skipped. It is the key to an effective estate plan. I had a client come to me last year. Her husband had passed away. They had spent thousands of dollars on a beautiful trust-based estate plan.

Ted (02:19.385)

But when we looked at how their assets were titled, nothing was in the trust. Not the house, not the bank accounts, not the investment accounts. Everything was still in their individual names. So despite having a trust, we had to open a probate case anyway. It took two years and cost the family over $15,000 in legal fees and court costs. All of that could have been avoided if they had simply funded the trust when they created it.

Here’s what you need to understand. Funding your trust means changing the title on your assets from your individual name to the name of your trust. Your house needs a new deed. Your bank accounts need to be retitled. Your brokerage accounts need to be transferred. Your life insurance policy need to be owned by the trust and you need to name the trust as the beneficiary. This isn’t something that happens automatically.

There is no magic wand. You have to take action. Now I know what you’re thinking. That sounds like a lot of work. And you’re right. It does take some effort. But here’s the good news. Once you do it, you’re protected. Your family won’t have to deal with probate. Your assets will be managed according to your instructions. If you become disabled, everything will flow smoothly to your beneficiaries when you pass away. That’s why at our firm,

We insist on helping our clients with funding. We don’t just hand you documents and send you on your way. We walk you through the process of retitling your assets. We even provide you with an asset alignment workbook with examples. We even host workshops multiple times a year to make sure our clients understand how to keep their trust properly funded. The second misconception

is believing that a trust eliminates all taxes. I hear this one all the time. Someone will come into my office and say they heard that putting everything in their trust will save them a fortune in taxes. Let me be clear about this. A revocable living trust does not reduce your income taxes. It does not eliminate estate taxes on its own.

Ted (04:40.398)

The IRS doesn’t care whether your assets are in your name or in your revocable trust. They’re still going to tax you the same way most of the time. That doesn’t mean trusts have no tax benefits. They absolutely do. A properly designed trust can help you use both spouses’ estate tax exemptions. That’s important if you have a really large estate or live in a state

that has a state estate tax. We can also build in provisions that minimize taxes for your beneficiaries. But here’s the key. The trust itself isn’t a magic tax shelter. It’s a planning tool that works alongside other strategies. If you have significant wealth, you might need additional planning. Maybe an irrevocable trust, maybe gifting strategies, and maybe even charitable planning. The point is,

Don’t create a trust thinking it’s going to slash your tax bill. That’s not its primary purpose. The real power of a revocable living trust is avoiding probate, providing disability planning, and protecting your beneficiaries. Those benefits alone make it worth doing. The third misconception is assuming that both a will and a trust means you’re fully covered.

A lot of people don’t understand how these two documents work together. They think having both gives them double protection. But if your will and your trust aren’t properly coordinated, you could end up with confusion, family disputes, and even court battles. Here’s how it should work. When you have a revocable living trust, you also need what’s called a pour-over will. This is not your typical will.

A poor over will is a safety net. It says that if there’s anything you own at death in your own name that’s not already in your trust, it should be transferred to the trust after having gone through probing. Think of it as a backup plan. Now here’s what’s important. Your poor over will should name the same person as executor that you named as trustee in your trust. Why?

Ted (07:03.459)

Because these two people need to work together. If you name different people and they don’t get along, you’re creating a nightmare for your family. I’ve seen situations where the executor and the trustee were fighting over who had authority to do what. It delayed the entire state administration by months. It cost the family thousands in legal fees, all because the documents weren’t coordinated. When we prepare estate plans at our firm, we make sure everything works together. Your trust,

your poor over will, your financial power of attorney, your healthcare power attorney, they all need to be part of one cohesive plan. They all need to name the same people in the same order, at least as it pertains to the financial matters. You can always name other individuals to handle medical matters, and many of my clients do. We want to make sure there’s no confusion, that there’s no conflict, that everything flows smoothly.

The fourth misconception is thinking you never need to update your trust. I can’t tell you how many times I’ve reviewed trusts that were created five, 10, 15, even 20 years ago. The clients think they’re all set, but when I read through the documents, I find all kinds of problems. The trust names a trustee who passed away five years ago. It leaves assets to a child who’s now estranged from the family. It doesn’t account for grandchildren who weren’t born yet when the trust was created.

or it’s based on old laws, particularly old tax laws that have completely changed. Here’s the reality. Your life changes, your family changes, and believe me, the law changes. Your trust needs to change with it. Think of your trust like your car. You don’t just buy a car and never take it in for maintenance. You change the oil, you rotate the tires, you make sure everything’s running properly. Your trust needs the same kind of attention.

Review your estate plan with your attorney, in my opinion, every year or every two years to ensure it still reflects your wishes, that named beneficiaries are still appropriate and assets are properly titled. Immediately review your plan after a major life event, maybe a birth or a death or a divorce, or perhaps a significant asset change, or you move to a different state.

Ted (09:31.908)

Don’t assume your old trust is sufficient. Get it reviewed and update it. The fifth misconception is expecting automatic privacy. One of the big selling points of a trust is that it keeps your estate 100 % private and confidential. Unlike a will, which becomes a public record when it goes through probate, a trust stays confidential. Your family’s business stays your family’s business.

Here’s the catch. Privacy isn’t automatic. You only get privacy if your trust is fully funded. Remember what I said earlier about funding. If you die with assets in your individual name, those assets have to go through probate and probate is public. Anyone can go down to the courthouse and see what you own, who your beneficiaries are, and how much they’re getting. I had a client who was very concerned about privacy. He didn’t want his neighbors knowing his business.

He didn’t want his kids’ inheritance amounts posted online. So we created a comprehensive trust-based plan. But then he never got around to retitling his brokerage account. When he passed away, that account had to go through probate. Everything became public record. His family was embarrassed. They felt like their privacy had been violated, all because one account wasn’t properly funded. To maintain privacy, fully fund your trust.

by correctly titling all assets, real estate, bank accounts, investments. Also, establish proper financial powers of attorney to avoid public, expensive, and time-consuming guardianships in case of disability. Plan for both death and disability to protect your privacy throughout your life. Let me recap the five misconceptions we covered today. Number one, thinking the trust means all the work is done. You have to fund it.

Number two, believing a trust avoids all taxes. It doesn’t work that way. Number three, assuming a will plus a trust automatically work together. They need to be coordinated. Number four, forgetting to update your trust. Review it at least every other year. And number five, expect automatic privacy. You have to do the work to keep things private. Before you go, there’s one more thing you need to know.

Ted (12:00.545)

Even if you have a fully funded trust, there’s still one major asset that can’t go into it. Your retirement accounts, your IRA, your 401k, your 403b. These accounts are controlled by beneficiary designations, not by your trust. And if you don’t handle these correctly, you could be setting your family up for a massive tax problem. Click on the video I’m showing you now to learn how to properly coordinate

your retirement accounts with your trusts so you don’t accidentally create a tax disaster for your kids. This is critical information that could save your family tens of thousands of dollars.

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