Four Avoidable Trust Mistakes
A trust is a helpful estate planning tool. With a trust, you sign over assets to be managed by a trustee, who manages them on behalf of the trust’s beneficiaries. As an alternative to a will, a trust can help reduce the size of your estate and allow you to avoid estate taxes at death or taxes on assets during your lifetime.
However, there are some common mistakes people make when it comes to trusts. By identifying them ahead of time, you can avoid any negative consequences.
Mistake # 1: You Choose the Wrong Trustee
The trustee has an important role to play. They manage all the assets in the trust while the trust is in existence. A good trustee will preserve the value of your assets, while a bad trustee will waste those assets by making poor decisions. An experienced trustee understands his or her duties to beneficiaries, whereas an inexperienced trustee can make simple errors that cost you time and money.
To select an appropriate trustee, consult with an estate planning attorney. If your trust is large, you might benefit from hiring a bank or professional trust company to serve as trustee. Conversely, if your estate is small, you might name a responsible family member who you know is good with money and can keep detailed records.
Mistake # 2: You Do Not Leave Clear Instructions
A trustee will invest or distribute assets based on the instructions you give. Unfortunately, the trustee is not a mind reader and can’t anticipate what you want done. For example, some people fund a trust for minor children and only want assets distributed when the minor reaches 21. If you don’t leave clear instructions to this effect, then the trustee might make distributions earlier than you intended.
To avoid leaving vague or unhelpful instructions, you should have an experienced estate planning lawyer draft the trust. He or she can spot problems on the horizon and draft instructions that ensure the trustee administers the trust according to your wishes.
Mistake # 3: You Fail to Update Your Trust
Life changes. If you create a trust when you are relatively young, then many changes can occur between then and your death: marriage, divorce, remarriage, the birth of a grandchild, etc. Based on these life changes, you might want to change your trust.
Ideally, you should meet with an estate planning attorney after any meaningful change like those listed above. Otherwise, you should periodically review your estate plan every five years.
Mistake # 4: You Don’t Hire the Right Estate Planning Attorney
Not all lawyers are the same. Some might practice estate planning only on the side while specializing in divorce or real estate. Because estate law is so complex, you will benefit from hiring attorneys who devote the bulk of their practice to estate planning issues.
At Millhorn Elder Law Planning Group in the Villages, our estate planning attorneys have decades of cumulative experience dealing with the toughest estate planning issues. Contact us today for a free consultation by calling 800-743-9732 or by sending an online message.