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Five Common Mistakes When Creating a Trust


Last updated 10/6/2020 at 12:23pm

A trust is often an important tool for planning an estate. It can protect your assets from probate, provide for your loved ones, and even provide for your own care if you become incapacitated in any way.

However, if your trust isn’t properly prepared, it could end up doing more harm than good. In some cases, your trust could even be completely invalidated as if it never even existed. The best way to make sure your trust is handled the way you intended is to work with an estate planning professional who can help you avoid some of these common mistakes.

Choosing the Wrong Trustee

A trustee is a person who will be given the authority to handle the assets held in the trust. This includes distributing the assets and making sure the taxes are paid. Obviously, the person you choose to appoint as the trustee should be someone that you can trust to carry out your wishes. They should also be capable of handling such responsibility. Consider choosing someone who is organized enough that they won’t miss deadlines and financially savvy enough that they won’t mismanage the funds.

Insufficient Funding

Without the proper funding, a trust isn’t going to do much to provide for your loved ones. Depending upon the amount of assets you currently have or will have, including life insurance policy payouts, your trust may be insufficiently funded. Your estate planning attorney can help you make sure that there will be enough funds in the trust to make it worth having one.

Incomplete or Unclear Instructions

In order for your trust to function properly, there should be clear instructions on how it will be funded, how it will be managed, when the assets should be distributed, and to whom. Without clear and complete instructions, your own wishes may not be carried out the way you wanted. In some cases, those decisions could end up in the hands of the court. It’s always a good idea to discuss what you want with your loved ones as well as with your estate planning professional who can make sure it’s all properly documented.

Missing Beneficiaries

Don’t just assume that everything you leave behind will automatically go to your spouse. If you want your spouse to be the beneficiary of your trust, name them in the trust documents. If you want your children to benefit from your trust, list them as beneficiaries as well. If they are minors, check with your attorney about setting conditions for when they will have access to the trust, how it can be used, and who will be allowed to manage the funds for them.

Forgetting About It

Reviewing your trust and other estate planning documents periodically is essential. If your circumstances change, such as getting divorced, adding another member to the family, or acquiring more assets, this is a good time to review the trust. Even if you haven’t experienced any major changes recently, it’s still wise to go over everything with an estate planning professional just to make sure everything is still in order and that there haven’t been any changes in state or federal laws that would affect your trust.

A qualified estate planning attorney can help you create a trust that holds up and meets the needs of you and your loved ones. Having an improperly prepared trust can be as detrimental as not having an estate plan at all.

If you have questions or want to get started creating a trust for your family, contact our California estate and trust planning lawyers at 800-244-8814 to schedule an appointment.

– Robert Galliano, Attorney at Law, Copenbarger & Copenbarger, LLP

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