Key Changes to Single Audit Requirements

• Increased Single Audit threshold: The spending threshold for the Single Audit has been raised from $750,000 to $1 million, meaning only school districts that expend $1 million or more in federal funds within the fiscal year will be subject to a Single Audit.
• Revised type A program determination: The threshold for defining “Type A” programs has also been raised from $750,000 to $1 million for entities expending between $1 million and $34 million in federal awards.
• New cybersecurity requirements: Recipients of federal awards must now implement reasonable cybersecurity measures as a part of their internal controls to safeguard sensitive information.
• Increased de minimis indirect cost rate: The de minimis rate for indirect costs has been raised from 10% to 15% of modified total direct costs (MTDC).
• Revised terminology: The term “non-federal entity” has been replaced with the term “recipient” or “subrecipient.”
• Increased subaward threshold: The exclusion threshold of subawards has been raised from $25,000 to $50,000 for modified total direct costs.
• Updated definition of equipment: The capitalization threshold for equipment has been raised from $5,000 to $10,000.
• “Questioned costs” clarification: The definition of “questioned costs” has been revised, with examples added to provide further clarification.
• Explanation required for questioned costs: When there are questioned costs, but the dollar amount is undetermined or not reported, the audit finding must include an explanation describing why the dollar amount is undetermined or not reported.
• Clarified definition of “period of performance”: The definition of “period of performance” has been updated to mean the interval of time between the start and end date of a federal award, which may span multiple budget periods.

What’s Next?

School districts should review and update their internal controls to ensure compliance with the revised Uniform Guidance. For additional assistance in preparing your district for audits and for all of your other accounting needs, please don’t hesitate to reach out to our education accounting team at RBT CPAs. We’re here to ensure your school district stays in compliance with all applicable federal and state requirements and accounting standards. Give us a call today and find out how we can be Remarkably Better Together.

The post Changes to the Single Audit: What School Districts Need to Know appeared first on RBT CPAs, LLP.

Challenges to Hiring and Retention in 2026:

• Demanding nature of hospitality work
• Generational shifts
• Lack of training and support
• Seasonal fluctuations
• Lack of career advancement
• Relatively low compensation
• Limited benefits

How Can You Address These Challenges?

1. Identify causes of low retention: Understanding why employees leave is critical to improving retention. Conduct regular check-ins with staff to identify issues, concerns, or potential growth areas. This practice not only demonstrates to your employees that you care about their happiness and job satisfaction, but also allows you to proactively make adjustments to create a better employee experience. When employees do leave, be sure to conduct exit interviews to determine their reason(s) for leaving, using this information to improve your policies and management practices moving forward.
2. Update your recruiting strategies: Offering competitive pay and benefits is, of course, an effective strategy for attracting qualified talent. Even if you can’t afford to provide full health benefits for employees, offering other perks such as paid time off, employee discounts, retirement plans, tuition reimbursement, and wellness benefits can help make your business attractive to prospective candidates. Other factors that can boost your recruitment efforts include offering flexible work arrangements when possible, providing referral bonuses and regular pay raises, and leveraging social media as a recruiting tool to appeal to younger generations.
3. Adapt to generational shifts: Gen Z employees are more selective when choosing jobs, particularly valuing flexibility and positive work environments. This new generation of workers is seeking roles that match their values and contribute to their long-term career goals. Appealing to this population involves promoting a positive workplace culture, embracing flexible scheduling when you can, and offering opportunities for career advancement.
4. Provide opportunities for growth: Reframing hospitality roles as long-term career opportunities rather than temporary positions can significantly improve retention rates. Employers should establish clear pathways for advancement, outlining how employees can grow within the organization over time. Providing ongoing training and development is key. Remember to keep training interactive, engaging, and meaningful. By investing in employee growth, businesses can motivate staff to stay and build their future within the organization.
5. Embrace technology: Automating routine tasks and processes through AI can reduce employee workload, helping to prevent burnout and allowing team members to focus more on delivering high-quality guest experiences. AI-powered tools can also help managers create staff schedules and forecast future staffing needs to avoid understaffing.
6. Practice transparency: Clear communication during the hiring process is essential to setting expectations and building trust. Employers should be transparent about job responsibilities and expectations at the time of hiring, preventing employees from being blindsided by unexpected duties or requirements later on.
7. Build relationships: Taking the time to understand your employees’ personal needs and professional goals lets them know you are invested in their growth and success. Additionally, by recognizing your team members’ hard work and accomplishments, you foster a positive and supportive workplace culture.

Partner with RBT

When you partner with RBT CPAs’ hospitality and restaurants accounting team, you gain the peace of mind that your business’s accounting needs are taken care of, so that you can focus on other priorities like your hiring and retention strategy. Give us a call today and find out how we can be Remarkably Better Together.

The post Attracting and Retaining Quality Staff in 2026: Challenges and Opportunities appeared first on RBT CPAs, LLP.

For this reason, the Office of the New York State Comptroller released a webinar last month aimed at assisting local governments in completing their delinquent Annual Financial Reports. The webinar focuses on helping local government employees understand the financial data needed to complete their Annual Financial Reports and where to find this data when formal accounting records are unavailable or limited. Here’s a broad overview of the key points covered in this webinar:

Questions addressed in this webinar:

• How do you complete your AFR when accounting records are missing?
• What source documents can you use to complete AFRs in the absence of formal accounting records?

Completing Delinquent AFRs: Webinar Key Points

• Consequences of not filing your AFR include reduced transparency and confidence in management, potential impacts on credit rating, exclusion from the OSC fiscal stress monitoring system, and reduced ability to assess financial condition and manage fiscal emergencies.
• Reasons for delinquent reports: the CFO did not meet fiscal responsibilities or was unaware of filing requirement, the municipality’s contact information is not up to date in OSC’s system, lack of board oversight.
• Source documents that can be used to complete AFRs include bank statements, reconciliations, debt records, claims abstracts, payroll and benefits reports, tax warrants, user accounts (sewer/water/electric), and board meeting minutes.
• Steps to follow when you need to complete a delinquent AFR with limited to no accounting records:

1. 1. Identify the significant events that occurred within that fiscal year.
   2. Compile the given financial data (i.e., bank statements, bank reconciliations, debt records, tax levies, etc.).
   3. Reconcile the beginning-of-year fund balance.
   4. Calculate the end-of-year fund balance (refer to the webinar for details on how to calculate this).
   5. Define revenues and expenditures.
   6. Review OSC’s AFR resources (e.g., training videos) and fill in AFR data.

Additional Resources

The webinar itself goes into much further detail regarding each step of this process, including examples and explanations. Other OSC resources that may be helpful include the following:

• AFR Information Page
• OSC Academy AFR training videos
• OSC data management unit (DMU)

Achieve Financial Health with RBT CPAs

RBT CPAs is committed to helping local governments address the unique challenges they face, including staying on top of their day-to-day accounting and preparing Annual Financial Reports. Our specialized government accounting team is here to support all of your municipality’s accounting, tax, audit, and advisory needs, so that you can focus on meeting the needs of your community.  Give RBT a call today and find out how we can be Remarkably Better Together.

The post Behind on Filing Your AFRs? This OSC Webinar May Help appeared first on RBT CPAs, LLP.

How is a union selected for a CAP audit?

Your union may be selected for a CAP audit for several reasons. A small number of unions are selected at random each year for CAP audits. Otherwise, factors considered by OLMS when selecting a union to audit include:

• Union size
• Geographic location
• Length of time since last audit
• Availability of investigators
• Failure to file required annual financial reports in a timely manner
• Discrepancies in financial reports
• Complaints received by OLMS regarding the union’s finances

What does a CAP audit entail?

A CAP audit begins with an interview of the primary financial officer, during which the investigator gathers detailed information regarding the union’s financial records, bookkeeping, and internal controls. The OLMS investigator may also request the presence of other employees involved in maintaining union financial records, such as bookkeepers or accountants. Union presidents are also often present for these interviews. During a CAP audit, the OLMS investigator reviews various financial records. Investigators may request any information from the union’s financial disclosure reports from the previous five years. Financial records typically reviewed during a CAP audit include, but are not limited to, original records (not copies) of the following:

• Bank account records: bank statements, duplicate deposit checks, debit/credit memos, and bank reconciliations
• Records for investments and all other assets, including inventories of fixed assets
• Receipts records: duplicate receipts, receipt journals, member ledger cards
• Disbursement records: canceled checks, check stubs, disbursement journals, payroll ledgers, vouchers, expense receipts, bills, credit card statements, and other supporting documents
• Audit reports prepared by union auditors or external accountants
• Minutes from executive board meetings and membership meetings
• Current constitution and bylaws
• Financial policy documents

Audit findings and recommendations will be shared with key union officials upon completion of the audit in the form of an exit interview and a closing letter. The investigator will offer compliance and technical guidance related to LMRDA and CSRA requirements. At this stage of the process, union officials have the opportunity to ask questions and contribute comments. The closing letter will then be made accessible to union members on the OLMS website.

How can you prepare for a CAP audit?

• Ensure your union’s financial records for the last five years are complete and accurate
• Review your union’s policies for compliance with LMRDA and CSRA requirements
• Ensure accurate and timely LM-2 reporting
• Review and strengthen your union’s system of internal controls

 Have Confidence in Your Union’s Compliance

When you partner with RBT CPAs, you can be confident in your union’s compliance with financial reporting and recordkeeping regulations. Beyond assistance with DOL audits, RBT CPAs’ union accounting team provides a full range of accounting, bookkeeping, and CFO services. Our union-specialized services include internal control reviews, financial statement preparation, forensic audits, LM-2 preparation, and more. Call RBT CPAs today for all of your union’s accounting needs and find out how we can be Remarkably Better Together.

The post CAP Audits—What Are They and How Can You Prepare? appeared first on RBT CPAs, LLP.

Bonus Depreciation

The OBBBA has permanently restored 100% bonus depreciation for qualified property placed in service as of January 19, 2025. Healthcare entities can now immediately write off capital investments, such as new medical equipment, facility upgrades, expansions, and technology infrastructure.

Section 179 Deduction

The expensing limit for the Section 179 deduction, which allows businesses to deduct the full cost of qualifying equipment in the year it is placed into service, has been increased to $2.5 million.

SALT Cap

The OBBBA has temporarily increased the federal deduction limit for state and local taxes (SALT cap) from $10,000 to $40,000. This limit will be adjusted each year for inflation until 2029, after which the SALT cap will revert to $10,000. The deduction phases out for taxpayers with modified gross income (MAGI) greater than $500,000 in 2025, with the MAGI threshold adjusted for inflation until 2029. For high-income earners before 2030, the SALT deduction is reduced by 30% of their MAGI over the threshold amount, but the deduction will not be reduced below $10,000. Importantly for many businesses, the OBBBA imposes no limitations on Pass-Through Entity Taxes (PTET), which serve as workarounds for SALT.

R&D Deductions

Healthcare organizations investing in research and development activities—such as developing new medical techniques, testing new medical devices, or conducting clinical trials—can now deduct these costs immediately. Under the OBBBA, U.S. research and development (R&D) expenditures, previously required to be amortized over five years, can now be deducted in the year paid. Small businesses averaging $31 million or less in annual gross receipts may elect to apply the change retroactively for tax years beginning after December 31, 2021. All businesses that made domestic R&D expenditures between 2022 and 2024 may elect to accelerate the remaining deductions for those expenditures over one or two years. Unlike domestic expenditures, however, foreign R&D costs continue to require a 15‑year amortization under Section 174.

QBI Deduction

The OBBBA permanently extends the Qualified Business Income (QBI) deduction, which allows eligible taxpayers to deduct up to 20% of their qualified business income.

Limitation on Business Interest

The OBBBA reinstated the EBITDA (earnings before interest, taxes, depreciation, and amortization) limitation under Sec. 163(j), effective for tax years beginning after December 31, 2024. Adjusted taxable income (ATI) will now be computed without regard to the deduction for depreciation, amortization, or depletion. For health care entities financing new facilities or expansions through debt, this shift back to an EBITDA-based calculation may allow for greater deductibility and improved cash flow.

New Deduction for Qualified Overtime

For tax years 2025 through 2028, the OBBBA creates a temporary deduction up to $12,500 for individuals who receive qualified overtime compensation, with phaseouts for high earners. “Qualified overtime compensation” is defined as the premium (“half”) portion of overtime pay required under the Fair Labor Standards Act (FLSA). Qualified overtime pay must be separately reported on employee W-2s. Healthcare organizations that employ large numbers of hourly employees may need to update their payroll systems to track qualified overtime compensation.

Partner with RBT CPAs for Expert Guidance

RBT CPAs’ specialized healthcare accounting team is here to help you navigate the tax law changes under the One Big Beautiful Bill Act and to make the most of expanded tax incentives in 2026 and beyond. Our experienced team of professionals is available to support all of your organization’s accounting, tax, audit, and advisory needs. Give us a call today and find out how we can be Remarkably Better Together.

The post Tax Law Changes Impacting Healthcare Entities in 2026 appeared first on RBT CPAs, LLP.

Let’s talk about what kinds of vet industry-focused advisors you should consider adding to your team.

Accountants

The benefits of specialized, vet-centric accounting services span across many areas of practice management. Veterinary-focused CPAs offer services extending beyond just tax preparation to encompass all aspects of a practice’s financial health. Veterinary accountants are well-versed in industry benchmarks and can help you understand where your practice can move the dial to increase profitability and attain your goals. They can provide a range of financial services tailored to the unique needs of your practice, including veterinary bookkeeping and accounts payable services, budgeting and forecasting, part-time CFO services, cash flow management, financial reporting and analysis, audits, and veterinary software advisory services. And of course, CPAs specializing in veterinary accounting are uniquely qualified to provide you with industry-specific tax planning guidance, helping you to navigate complex tax matters such as buy-ins and buy-outs, sales and use taxes, equipment depreciation, and succession planning.

Attorneys

Veterinary lawyers specialize in issues specific to veterinary medicine, such as licensing and board regulations, animal welfare laws, state and federal compliance, legal standards of care, malpractice lawsuits, practice acquisitions, employment contracts, practice leases, and partnership agreements. An attorney who specializes in veterinary law will be deeply familiar with the legal considerations specific to the veterinary industry.

Bankers

Many banks have industry-specific teams dedicated to working with veterinary practices. These teams offer specialized services such as practice acquisition financing, construction loans, equipment financing and leasing, risk management, and veterinary student loan refinancing. Vet-specific bankers offer their expertise for startups, acquisitions, and expansions, ensuring more favorable financing options.

Real Estate Experts

Considering starting your own practice, relocating, or expanding? Veterinary practices benefit significantly from working with a real estate broker who specializes in veterinary and healthcare properties. Veterinary facilities have unique requirements that general commercial brokers may not fully understand. By working with a veterinary-specific real estate broker, your practice gains a knowledgeable advocate who understands both the real estate market and the realities of running a veterinary hospital.

Benefits of a Specialized Team

A team of specialized advisors can help you:

• increase your practice’s profitability by optimizing operations and measuring key performance indicators,
• make data-informed business decisions,
• prevent burnout by offloading complex business tasks to industry experts,
• mitigate risk by identifying and preventing potential issues before they occur,
• have confidence in your practice’s compliance, and most importantly,
• focus on your core mission of providing your patients with excellent care.

RBT—Veterinary Accountants You Can Trust

RBT CPAs’ veterinary accounting team is intimately familiar with the unique challenges and opportunities encountered by veterinary practices. While you focus on providing the highest quality of care to your patients, our team will help you make financial decisions that strengthen your profitability, compliance, and long-term success. RBT is here to support all of your practice’s accounting, tax, audit, and advisory needs and can also refer you to specialized professionals in other fields. Contact RBT CPAs today and find out how we can be Remarkably Better Together.

The post Why You Should Equip Your Practice with a Team of Vet-Focused Professionals appeared first on RBT CPAs, LLP.

If you turned 73 in 2025 and own a retirement account, you will likely need to take your first required minimum distribution by April 1, 2026, to avoid potential penalties.

What is an RMD?

A required minimum distribution (RMD) is the minimum amount that must be withdrawn each year from certain retirement accounts once the account holder reaches age 73.

Retirement Plans Subject to RMD Rules

RMD requirements generally apply to the following retirement plans:

• Employer-sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans
• IRA-based plans such as traditional IRAs, Simplified Employee Pension (SEP) IRAs, and SIMPLE IRAs
• Inherited Roth IRAs and designated Roth accounts after the death of the account holder

When are you required to start taking RMDs?

Owners of IRA-based retirement plans must begin taking RMDs in the year they turn 73, even if they are still working.

If you turned 73 during 2025, your first RMD must be taken by April 1, 2026. Your second RMD must then be taken by December 31, 2026.

For workplace retirement plans (i.e.,401(k) or profit-sharing plans), RMDs can generally be delayed until retirement if you are still working. However, this exception does not apply to individuals who own 5% or more of the business sponsoring the retirement plan.

What happens if you fail to take an RMD?

If you do not withdraw the full required amount within the specified time frame, you may be subject to a 25% excise tax on the amount that should have been withdrawn.

If the error is corrected within two years, the penalty may be reduced to 10%. In certain cases, the penalty may also be waived if the individual can demonstrate that the failure to take the RMD was due to reasonable error and that appropriate corrective steps are being taken.

How is your RMD calculated?

Your RMD is calculated by dividing the balance of your retirement account as of December 31 of the previous year by a life expectancy factor provided by the IRS in Publication 590-B.

Most individuals use the “Uniform Lifetime Table” to determine their life expectancy factor.

Example

A 73-year-old individual has $100,000 in their retirement account as of December 31, 2025.

According to the Uniform Lifetime Table, the life expectancy factor for someone age 73 is 26.5.

$100,000 ÷ 26.5 = $3,773.58

In this example, the individual’s RMD would be $3,773.58.

Can you withdraw more than the required minimum?

Yes. You are always permitted to withdraw more than the required minimum distribution in any given year.

Are RMDs taxable?

Yes. RMDs are generally taxable as ordinary income because contributions to these retirement accounts were typically made with pre-tax dollars.

However, New York State provides a retirement income exclusion. Individuals age 59½ or older may exclude up to $20,000 of retirement income per year from New York State income tax. Married couples filing jointly may each qualify for this exclusion.

Additional Information and Guidance

Additional information and answers to common questions can be found on the IRS Required Minimum Distribution (RMD) FAQs. To avoid potential penalties and ensure accurate calculations, consider working with an accounting professional familiar with RMD requirements, deadlines, and tax implications. RBT CPAs’ estate planning team is here to answer your RMD-related questions, and to support all of your other accounting, tax, audit, and advisory needs. Give us a call today to find out how we can be Remarkably Better Together.

The post What are Required Minimum Distributions and When Do You Have to Start Taking Them? appeared first on RBT CPAs, LLP.

These disruptions have already begun to impact global supply chains, especially for industries reliant on Middle Eastern oil and liquid natural gas for production. Many U.S. manufacturers are bracing for supply chain disruptions while planning for potential short-term and long-term economic impacts of war with Iran.

Currently, the most significant impact on global supply chains stems from disruption to the Strait of Hormuz, a crucial shipping channel in the Middle East connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. Approximately 20 percent of the world’s oil and gas is shipped via the Strait of Hormuz. Following the joint strike against Iran by the U.S. and Israel on February 28, access to this vital trade channel has effectively been cut off, with Iran threatening to attack any ships attempting to pass through. The closure poses serious operational challenges for ships in the area, including oil and liquid natural gas tankers. Many ships are rerouting via the Cape of Good Hope, which will result in significant delays for deliveries. The closure of multiple airports and large portions of airspace in the Middle East due to high security risk has also stalled the movement of air cargo in the region.

The extent of the impact on global manufacturing depends largely on how long the conflict lasts. Logistics Viewpoints compares the potential fallout resulting from a short-term versus a prolonged conflict, predicting that even a short-lived conflict of seven days or less will result in a surge in crude oil prices, higher raw material costs, shipping delays, and raw material shortages. A prolonged conflict, on the other hand, would have a much more significant impact on global supply chains. According to Logistics Viewpoints’ analysis, if the war extends beyond four weeks, manufacturing companies will face even greater pressures related to energy prices, logistics costs, raw material availability, and consumer demand.

As of right now, the duration of the war against Iran remains unknown. Manufacturing companies are encouraged to prepare for possible economic impacts by assessing supply chain exposure, diversifying supply chains, and planning for various potential scenarios. RBT CPAs’ manufacturing accounting team will continue to monitor the impact of the conflict on manufacturing companies and we are ready to assist you in planning strategically in the face of potential supply chain disruptions. And as always, RBT is here to support all of your business’s accounting, tax, audit, and advisory needs while you focus on risk management and mitigation strategies. Give us a call today and find out how we can be Remarkably Better Together.

The post As Conflict in the Middle East Poses Risk to Global Supply Chains, Here’s What Manufacturers Should Know appeared first on RBT CPAs, LLP.

Credits That Have Already Expired

The following clean energy credits expired within the last year:

• Section 25E Previously-owned Clean Vehicles Credit and Section 30D New Clean Vehicle Credit—expired after September 30, 2025

Two credits related to the purchase of clean vehicles, the Previously-owned Clean Vehicles Credit and the New Clean Vehicle Credit, expired for vehicles acquired after September 30, 2025.

• Section 25D Residential Clean Energy Credit—expired after December 31, 2025

The Residential Clean Energy Credit is a 30% credit that applies to the purchase of new, qualified clean energy property for a primary or secondary residence. Property had to be fully installed and placed in service by December 31, 2025, in order to qualify for the credit.

• Section 25C Energy Efficient Home Improvement Credit—expired after December 31, 2025

The Energy Efficient Home Improvement Credit is a 30% credit (up to $3,200 a year) that applies to qualified energy-efficient improvements to a primary residence. Property had to be placed in service by December 31, 2025, to qualify for the credit.

Incentives Expiring in 2026 and 2027

The following federal incentives are set to terminate in 2026 or 2027:

• Section 179D Energy Efficient Commercial Buildings Deduction—expires for projects with construction beginning after June 30, 2026

The Energy Efficient Commercial Buildings Deduction is a tax deduction available to qualifying building owners who place in service energy-efficient commercial building property (EECBP) or energy-efficient commercial building retrofit property (EEBRP). Projects subject to the 179D deduction have to begin construction before June 30, 2026, in order to still be eligible for the deduction.

• Section 30C Alternative Fuel Vehicle Refueling Property Credit—expires after June 30, 2026

The Alternative Fuel Vehicle Refueling Property Credit is a tax credit available to businesses and individuals who install qualified refueling or recharging property, including electric vehicle charging equipment, in a qualifying location. This credit expires for property placed in service after June 30, 2026.

• Section 45L New Energy Efficient Home Credit—expires for homes acquired after June 30, 2026

The New Energy Efficient Home Credit is a tax credit available to eligible contractors who build or substantially reconstruct qualified new energy-efficient homes. The amount of the credit depends on the type of home, its energy efficiency, and the date the home is acquired. Eligible contractors may be able to claim up to $5,000 per home. This credit will not be allowed for any new energy-efficient home acquired after June 30, 2026.

• Section 48E Clean Electricity Investment Tax Credit and Section 45Y Clean Electricity Production Tax Credit for solar and wind projects—expire for facilities placed in service after December 31, 2027

Phase-outs for two major federal tax incentives for renewable energy have been accelerated under the OBBBA. The Clean Electricity Investment Credit (ITC) and the Clean Electricity Production Credit (PTC) for the construction of applicable wind and solar facilities are set to terminate after 2027.

The deadlines for eligibility for these credits are as follows:

• For solar and wind projects starting before July 4, 2026: the contractor has (the standard) up to four years to complete the project and claim the ITC and PTC.
• For solar and wind projects starting after July 4, 2026: the project must be completed by December 31, 2027, in order to be eligible for the ITC and PTC.

The IRS has released guidance regarding the “beginning of construction” for the purpose of enforcing the ITC and PTC credit termination date for solar and wind facilities.

Looking Forward

2026 and 2027 will be critical for capitalizing on these federal tax incentives while they are still available. Consider meeting with your RBT accountant soon to discuss the possibility of claiming clean energy tax credits and deductions before they expire. Contact RBT CPAs today to find out how we can be Remarkably Better Together.

The post Timeline of Expiring Clean Energy Incentives: Key Dates for Contractors to Know appeared first on RBT CPAs, LLP.

This article isn’t meant to argue for or against revocable living trusts. Instead, the goal is to explain what they actually do, what they don’t do, and what’s worth paying attention to if you already have one or are considering setting one up. Like most legal and tax tools, their effectiveness depends heavily on individual facts and circumstances.

What is a revocable living trust?

An RLT is a trust created during an individual’s lifetime that can be amended, restated, or revoked at any time while the grantor (the person who creates it) is alive and competent. In most cases, the grantor also serves as the initial trustee and beneficiary during life – meaning they retain control over the trust and continue to benefit from the assets held in it.

From a practical standpoint, this usually means day-to-day control usually doesn’t change. Assets can still be bought, sold, and managed as before. The trust becomes more relevant if the grantor becomes incapacitated or dies, when a successor trustee steps in to manage or distribute assets under the trust’s terms.

Myth #1: “A revocable living trust automatically avoids probate.”

Reality: Only assets that are actually owned by the trust avoid probate.

Creating the trust document alone isn’t enough. Assets must be properly titled in the name of the trust (often referred to as “funding” the trust). If a home, investment account, or business interest remains in an individual’s name, that asset may still be subject to probate, even if a trust exists.

This is one of the most common disconnects. Many trusts are only partially funded, which can result in a mix of probate and non-probate administration. A revocable trust can help avoid probate, but only for assets that are correctly aligned with it.

It’s also worth noting that probate itself varies widely by state. In some jurisdictions, probate is relatively streamlined and inexpensive. In others, it can be slow, formal, and costly – particularly for real estate. Whether probate avoidance is a meaningful benefit often depends on where the grantor lives and what assets they own.

Myth #2: “A revocable trust reduces estate taxes.”

 Reality: In most cases, it does not.

Because the grantor retains the power to revoke or change the trust, assets held in a revocable living trust are generally still included in the grantor’s taxable estate. From a federal estate tax perspective, ownership hasn’t really shifted.

During life, revocable trusts are usually treated as “grantor trusts” for income tax purposes. Income, deductions, and credits are typically reported on the individual’s personal return, just as they would be if the trust didn’t exist. This treatment is outlined in guidance from the IRS.

That said, while a revocable trust usually doesn’t reduce estate taxes, it may help reduce other estate-related costs. In states where probate is expensive or attorney-intensive, avoiding or minimizing probate can result in lower administrative fees, court costs, and delays. These savings aren’t tax savings, but they can still be meaningful.

Estate tax planning, when needed, generally requires additional strategies beyond a standard revocable trust.

Myth #3: “A revocable trust protects assets from creditors or lawsuits.”

Reality: Generally, it does not – but there are limited, situational benefits worth understanding.

Because the grantor can revoke the trust and reclaim the assets, creditors are usually able to reach trust assets to the same extent they could reach assets owned outright. For this reason, RLTs aren’t considered asset-protection vehicles in the traditional sense.

However, there are narrow circumstances where an RLT can indirectly help preserve assets – not by blocking creditors, but by improving control and administration. For example:

• Incapacity planning: a well-drafted trust can ensure that a successor trustee steps in seamlessly if the grantor becomes incapacitated, reducing the risk of court-appointed guardianship or mismanagement.
• Trustee succession safeguards: trust terms can be written to bypass an otherwise-named successor trustee if that person is unable or unsuitable to serve (for example, due to legal financial, or personal issues), allowing an alternate or professional trustee to step in.

These are not creditor-protection strategies in the strict legal sense, but they can matter in preserving assets through orderly management during vulnerable periods.

Myth #4: “Once there’s a trust, beneficiary designations don’t matter.”

Reality: Beneficiary designations often control how assets pass and can override the trust.

Retirement accounts, life insurance policies, and many financial accounts transfer by beneficiary designation. If those designations don’t align with the trust, the trust may not govern those assets at all.

Coordination is key – and it isn’t always intuitive. For example, certain assets, like ordinary bank or brokerage accounts, may be titled in the name of the trust. Others, such as retirement accounts or life insurance policies, are often better left payable directly to individuals, depending on tax, distribution, and planning goals. In some cases, a trust may be named as beneficiary, but only if it’s properly drafted to handle those assets.

There’s no universal rule here. The “right” approach depends on the type of asset, the beneficiaries involved, and the broader estate and tax plan.

Myth #5: “A revocable trust eliminates all court involvement and delays.”

Reality: It can reduce probate involvement, but administration still takes time and effort.

Even without probate, someone must gather assets, pay expenses, handle tax filings, and carry out the terms of the trust. A revocable trust can streamline this process, especially for more complex estates, but it doesn’t eliminate administrative responsibility.

One of the underappreciated benefits of an RLT is that it allows for more detailed and customized instructions than a simple will. This can be particularly helpful when the estate includes a closely held business, multiple properties, or assets that require ongoing management. Clear instructions can reduce uncertainty, minimize disputes, and give successor trustees a practical roadmap during administration.

It changes the process; it doesn’t remove it.

Myth #6: “Revocable trusts guarantee privacy.”

Reality: Privacy is generally the rule, but there are important exceptions.

Unlike probate proceedings, trust documents typically aren’t filed with the court, which helps keep estate details out of the public record. This is one of the most cited advantages of revocable trusts.

However, privacy isn’t absolute. Trustees have disclosure obligations to beneficiaries, and disputes over the trust can lead to litigation. In those cases, certain information may become part of a court record. Even then, trusts are rarely made public in their entirety, but some loss of privacy is possible.

The takeaway: RLTs usually enhance privacy, but they don’t guarantee complete confidentiality in every scenario.

When a revocable living trust can be a good fit

Revocable trusts tend to be most useful when one or more of the following apply:

• Real estate is owned in more than one state
• Avoiding probate is a high priority, particularly in states with complex or costly probate systems
• Continuity is important in the event of incapacity
• The estate includes complex, illiquid, or hard-to-administer assets
• Privacy is a meaningful concern
• Distributions are uneven, long-term, or likely to cause friction among heirs

They can also help reduce the risk of disputes by allowing the grantor to leave clearer, more detailed instructions than would typically appear in a basic will.

In contrast, an RLT may offer limited additional value when an estate is simple, most assets already pass efficiently by beneficiary designation, and state probate rules provide for a streamlined or expedited administration process. Probate varies significantly by state, and in some jurisdictions, the process can be far more burdensome than many people expect.

The most common issue to watch for: trust funding and maintenance

The biggest practical risk with revocable living trusts isn’t the document itself; it’s follow-through.

Assets need to be retitled, beneficiary designations coordinated, and the trust revisited periodically as circumstances change. New accounts, real estate purchases, family changes, or changes in state law can all affect how well the trust works in practice.

The good news is that revocable trusts are flexible. If issues are identified, they can usually be addressed during the grantor’s lifetime through amendments, restatements, or improved coordination.

Practical takeaway 

Revocable living trusts are neither a universal solution nor something to dismiss outright. They’re one tool among many, and their effectiveness depends on how they’re designed, funded, and maintained – and on the individual facts involved.

For those who already have a trust, periodic review can help ensure it still aligns with current goals, assets, and family dynamics. For those considering one, understanding what the trust does – and just as importantly, what it doesn’t do – can prevent surprises later.

If you have questions about how a revocable living trust fits into your broader tax and estate plan, or whether your existing trust is properly aligned with your current circumstances, please contact our office. We’re happy to work with you and your estate planning attorney to ensure asset ownership and tax considerations are coordinated and working as intended.

This article is provided for general informational purposes only and should not be relied upon as legal or tax advice. Estate planning strategies should always be evaluated with qualified professionals in light of your individual facts and state laws.

The post Living Trust Myths vs. Reality: What a Revocable Trust Really Does appeared first on RBT CPAs, LLP.