A living trust can be an important part of your estate plan. However, people make several mistakes while creating one. These mistakes can hamper the reason and your motive for creating trust. A living trust will only benefit you if you know how to set it up properly.
Establishing your own trust, let alone your estate plan can be tricky. Since there are various complex structures involved, you may need an attorney for estate planning to explain them to you. To make sure your family does not face problems after you pass away, learning about these mistakes can help avoid them.
Mistakes people make regarding trusts
- Not funding the trust.
According to attorneys, the biggest and most common mistake they have seen people make is not funding the trust. This may come off as surprising, but so many people go through the struggle of working with an attorney and creating trust, only to leave it empty.
Once you are done with the paperwork, you must retitle your assets in the name of the trust. Consult with your attorney before this to understand the process. Sometimes retitling certain assets can be as easy as naming beneficiaries in your Will.
- Not having a properly drafted trust document.
Some people prefer to do the work themselves and create a trust on their own, while others take the help of an attorney. No matter whichever option you choose, you must have a properly drafted document. Your trust should contain valid trust language. Templates you find online usually do not meet the requirements of unique needs that might vary from trust to trust.
You should also ensure that your trust document meets all of your objectives. Not one size fits all, and trusts are a big example of that. If you have specific needs, you must see to it that your trust document uses the right language.
- Not reading the trust document.
People who do not have much legal knowledge or who do not have time to invest in creating a trust usually hire an attorney to lower their burden. While this step is recommended because an attorney can ensure a properly drafted document, it can also create problems if you do not read your document. It is not recommended to blindly trust your attorney, no matter how experienced or qualified they might be.
- Choosing the wrong trustee.
Choosing a trustee for your trust is one of the most important steps. While you can act as the trustee during your lifetime, you will need someone to take on the responsibility after you pass away. This person will manage assets, execute transactions, handle distributions, etc.