5 Common Trust Mistakes in Estate Planning

August 15, 2023

Because there are so many types of trusts, this document is widely considered to be the most versatile estate planning document. Also, having one or more trusts even makes sense for many estate planners who are not in the one percent.

If you plan a strategy for getting the most out of your trusts and follow through on that strategy, your heirs and beneficiaries will probably be grateful that you saved them some time in probate court. However, a mistake when drawing up a trust can cause more headaches than the trust was supposed to eliminate. Below are some common mistakes to avoid when creating a trust for your estate plan.

Failing to retitle assets.

Perhaps the most common mistake when it comes to trusts is neglecting to actually fund the trust. Funding the trust means you retitle your assets to make the trust the legal owner. If you wish to put your home in a trust, you probably need to contact your mortgage lender, bank, insurance provider, and any other people whose names are on the title. The retitling process may be simpler for other assets, but it’s still incredibly important.

Assuming your trust’s assets are safe from creditors.

One of the main perks of trusts is the ability to protect your assets. However, some trusts do NOT afford grantors (trust creators) this luxury. Generally speaking, assets you place into a trust that you have no ongoing control over are often shielded from creditors.

On the other hand, a living trust allows you to transfer assets into the trust without relinquishing control over those assets. With that freedom comes a price, though: assets contained in a living trust are usually fair game for creditors.

Giving the entirety of the trust’s contents to your beneficiary all at once.

A feature of trusts many people find helpful is the ability to structure payouts in creative ways. For example, some estate planners wish to give their children money for big purchases or after they accomplish certain milestones. Without structuring the trust to follow those provisions, though, your beneficiary may get the entire payout as soon as they turn 18. This can sometimes result in irresponsible spending practices by a young beneficiary.

Naming an unsuitable trustee.

A trustee administers the trust according to its terms after the grantor passes away or becomes incapacitated. Someone in this position does not have to be a financial genius, but it may help if they understand basic financial principles. Being an honest person who will faithfully carry out the trust’s terms is another characteristic of a good trustee. If no one close to you fits the bill, you could reach out to an attorney or financial institution for a professional trustee.

Assuming a DIY estate plan will accomplish your goals.

The allure of do-it-yourself wills and trusts is strong; besides, who doesn’t want to save money? The bottom line, however, is that an estate plan not reviewed by an experienced attorney can have gaps and technical inconsistencies that render the document useless. Laws surrounding estate planning, taxes, and asset protection constantly change, and a skilled attorney can spot potential vulnerabilities.

The purpose of a caring law firm like Schlegel Livingston is to help Floridians achieve their estate planning goals. Whether you want to avoid probate, protect your assets, prepare for your potential incapacity, or simply make sure the next generation is cared for, we can help you get there. Our team looks forward to helping you!