You have probably heard about the benefits of using trusts when making your estate plans. Unlike a traditional will, a trust will help avoid the probate process and protect your family’s wealth while giving you greater flexibility and control over your estate.
However, like all other estate planning tools, you must do everything by the book when establishing a trust. Certain mistakes made when creating a trust can render your estate plans useless and cause chaos among your loved ones when you are gone. Below are some of the slip-ups you should be wary of.
1. Failing to fund the trust properly
A trust without assets is just an empty shell with no benefit to its beneficiaries. Therefore, when you create a trust, you should ensure it is properly funded in the eyes of the law. It includes making formal property transfers to the trust, changing the title of assets and designating the trust as the beneficiary of assets with beneficiary designations.
2. Not choosing the right type of trust
It could be disastrous to your plans if you settle on a type of trust that does not align with your objectives. For instance, a special needs trust is specifically tailored to provide for a loved one with special needs. If you create the wrong trust for that purpose, it may be impossible to attain your goals.
3. Having ambiguous terms and conditions
You cannot afford to have loose ends or ambiguity in the terms of the trust since they will guide how it will operate. You will not be around to clarify your intentions, and it is best to have clearly defined terms that do not leave room for misinterpretation.
4. Not choosing the right trustee
The trustee is the person who is responsible for managing the trust and making sure that your assets are distributed according to your wishes. They are essentially the gatekeepers of the trust. Therefore, you should ensure you choose a trustee you trust with the skills and knowledge to effectively manage the trust.
5. Not seeking legal guidance
It helps to have the correct information when creating a trust, from the legal requirements to any tax implications the trust may have on your estate, among other things. Consider seeking experienced assistance if you have any questions or concerns.