Mistaken beliefs about Trusts can derail estate planning, perpetuating a cycle where only 9% of inherited wealth reaches the third generation. By contrast, some families grow both financial and human capital across generations. Correcting myths is key to breaking the destructive cycle and fostering long-term growth.
Myth: A Trust Loses Value After Asset Transfer and Should Be Shut Down
Reality: While some Trusts are designed as single-use devices, a well-crafted Trust gains value over time, serving as an investment, business, wealth preservation, tax planning, and succession tool. Benefits like “spendthrift provisions” and Generation Skip Tax exclusions depend on retaining assets. Distributing assets or terminating the Trust negates these advantages.
Myth: The Law Requires Trusts to Eventually Terminate
Reality: The outdated “Rule Against Perpetuities” once mandated Trust termination, but many jurisdictions have eliminated or relaxed it. A “jurisdiction-independent” Trust can relocate to permissive locales, allowing indefinite continuation for future generations’ benefit.
Myth: Older People Handle Money Better, So Age-Based Distributions Are Ideal
Reality: Age poorly predicts financial wisdom. A competent 24-year-old may falter at 42 due to crises. Medical or marital issues can jeopardize wealth at any age. Discretionary, not mandatory, distributions tied to factors other than age, with limits on principal consumption, better protect wealth.
Myth: Preserving Wealth Requires Ruling from the Grave
Reality: Ruling from the grave is impossible and not the goal. A Trust is like building roads with safety rules—prior generations set the framework, but the living choose the vehicle and destination. Distributing all assets equates to no roads or rules, fostering chaos. Providing access to protected capital empowers generations to grow wealth without micromanagement.
Myth: You Must Pre-Assign Specific Assets to Each Beneficiary
Reality: Pre-dividing every asset complicates Trusts and quickly outdated them as assets change. Specify shares as equal, percentages, or dollar values. Designate specific items (e.g., a business to involved heirs) only when necessary. Simplifying allocations streamlines planning.
Myth: My Children Will Follow My Wishes
Reality: Children prioritize their desires, especially post-death, seeking unrestricted wealth access. Your influence wanes early. Avoid naming disinherited or overly eager children as sole Trustees. Independent Co-Trustees or Trust Protectors ensure your wishes are honored.
Myth: Statutory Provisions Suffice for Trusts
Reality: Statutes fill gaps where Trusts are silent but reflect politicians’ assumptions, not your goals. They change with politics or location, becoming obsolete. Explicit Trust provisions tailored to your needs are essential.
Myth: Long Trusts Are Complicated, Short Trusts Are Simple
Reality: Early cars were simple but hard to drive; modern cars are complex yet user-friendly. A “full toolbox” Trust may be longer but is easier to manage and safer, offering robust features for complex needs.
What About Bob?
Bob, sole Trustee and Beneficiary of his mother’s million-dollar Trust, didn’t need the funds, having thrived financially. The Trust mandated full distribution at age 45. At 48, when his mother died, Bob faced bankruptcy. Forced to distribute, his creditors seized everything—a preventable loss with discretionary provisions.
What Does It Mean?
Myths misguide planning, but clarity drives success. Identify a myth affecting your Trust, note a corrective action, and act. For a complimentary copy of “Why All Trusts Are Not Created Equal” or “How to Leave Your Estate to Your Children Without Ruining Them,” email info@DurfeeLawGroup.com or call 480.324.8000.
More Trust Myths to Bust © 2025 by Rick Durfee is licensed under CC BY 4.0 
More Trust Myths to Bust