Setting up a living trust can have many benefits for your designated beneficiaries. Perhaps most importantly, creating a fully-funded trust will allow your beneficiaries to avoid court interference if you die or become incapacitated.
Unfortunately, many people make mistakes when setting up a living trust. Mistakes can prevent your wishes from being carried out as you had intended. Below, we’ll examine five of the biggest mistakes people make when setting up a trust.
Improperly Prepared Documents
In an effort to save money, many people will attempt to create a trust themselves using forms they found online, or they will hire a cheap but inexperienced lawyer to handle the paperwork for them. Unfortunately, if you fail to properly prepare the documents that establish your trust, then your trust may be invalid, or at the very least, it may not work as you planned.
The last thing you want is to waste your money, which is why hiring a skilled attorney to help you create your trust is crucial. A knowledgeable lawyer who has extensive estate planning experience will be equipped to help you properly set up your trust and offer you valuable legal advice.
Failing to Read the Trust Documents
While it should go without saying, reading your trust documents and having a solid understanding of your plan is of paramount importance. If you are having trouble comprehending specific aspects of your trust documents, having an attorney on hand to answer your questions can be incredibly beneficial.
Failure to Fund the Trust
Once you’ve established your trust on paper, it’s time to fund it. Even if you properly filled out all of your forms, made your instructions very clear, and successfully established a living trust, it will be useless to your beneficiaries unless you fund it. Funding the trust means actually transferring the ownership of the assets from yourself to the trust.
Until you place your assets into the trust, the trust cannot control those assets. Many individuals who set up a trust fail to fund it, which means that the assets they would have placed in the trust end up going through probate. One of the primary aims of a trust is to circumvent the probate process, so make sure you fully fund the trust once it has been established.
Choosing the Wrong Successor
Even if you left clear instructions as to how the trust should be managed, and you fully funded the trust before passing away, the trust still may not be administered according to your wishes if you select a successor who fails to follow your instructions. That’s why it is imperative to evaluate every possible candidate carefully before you name a successor trustee.
While many individuals will name an adult child as their successor trustee, hiring a professional trustee might be a safer bet if you are concerned about your child’s ability to manage the trust responsibly. The most important thing is to ensure that the trust is administered according to your plans.
Failure to Update the Trust
If your financial or familial circumstances have changed since you initially created the trust, you might need to revise your trust to accommodate those changes. If you don’t update your trust, it may not function as you intended.
Living trusts have many advantages for your estate and beneficiaries, especially if you want to avoid probate. The legal professionals at The Law Offices of Stephanie D. Hon can help you avoid some of the most significant mistakes that many trustees make and give you peace of mind that your trust will be administered according to your wishes. Contact us today for a free consultation.