Common Trust Mistakes and How To Avoid Them
Trusts are a very common estate planning tool that help people directly transfer funds to individuals or organizations as they wish. In many cases, they are used to give money to family members while legally avoiding probate, estate taxes, or other regulations. However, they can also be used for a variety of other purposes. Although trusts are fairly easy to set up with some guidance from a trained lawyer, there are plenty of common mistakes and pitfalls that are easy to fall into. In this article, we’ll cover some of the biggest trust mistakes and how you can avoid them.
The biggest mistake that people make when creating a living trust is that they forget to ‘fund’ the trust. After you sign all the paperwork to finalize the creation of your living trust, you need to go through and change the titles for all your assets so that they are held by the trust instead of in your name. Many people don’t realize they need to do this, particularly if they are trying to create a trust on their own instead of using a lawyer for help. You also may want to consider creating a pour over will. This will take all of your assets that can’t be retitled during your life and automatically transfer them into the trust upon your death so that they can be distributed quickly while avoiding probate. It is very important to work with a skilled lawyer throughout this entire process to ensure that everything is done correctly and that all documents are legal.
Another very common mistake that many people make is forgetting to update their trust when major events happen in their lives. If you get married or divorced, this can affect not only your personal plans for how you would like to distribute your assets, but also the legal ownership of some of your property. These things can also change drastically if you have children. Whenever a major life event happens, it’s important to go back into your trust document and make any necessary changes so that your wishes will be respected when your trust is put into action.
When it comes to setting up trusts for your children, it can be very challenging to know just how much money to give them, or when you should give them access to it. Although you may want to give your children huge sums of money, it’s important to use some moderation, as you never know how their lives are going to change and what issues you could be creating. While many children are responsible enough to handle a large inheritance, some are not, and so this must always be taken into consideration when setting up a trust. Some children may also need more help than others depending on their own personal circumstances (for example, if one child gets hurt or sick, you may want to give them more money to cover health expenses). It’s important to be flexible and keep these things in mind while planning.
Although it can be tempting to rush to create a trust before a major change in your life, such as a medical treatment or a big move, you should always make sure to take your time with this complex process. One of the biggest mistakes that people make when creating trusts is that they don’t think they need a lawyer and that things will be better if they just rush through the process themselves by drawing up the documents online. You should always avoid this strategy, even if you are planning on setting up a very simple trust. The best way to put together any document with potential legal ramifications is to sit down with a professional and go through all the necessary steps together.
