As you begin to look into your estate planning options, you may be wondering about the benefits of a living trust. This powerful tool is a critical component of estate planning, enabling you to protect your assets, avoid probate and ensure your loved ones remain stable even when you are no longer around to provide for them.
However, creating this document is only half the battle. Proper funding is equally essential to make the most of this valuable resource. Like many other legal procedures, funding a living trust can be complex and fraught with pitfalls that compromise effectiveness. What crucial mistakes should you avoid to make sure that your living trust works as intended?
Mistake #1: Failing to transfer all assets into the trust
Many tend to overlook the importance of transferring all their intended assets, such as real estate, vehicles, bank accounts and investments, into their trusts. This oversight can trigger the probate process – the court-supervised distribution of your assets and the very thing you are trying to avoid by creating the trust in the first place.
In California, where real estate values are notoriously high, this mistake can be particularly costly. Failing to transfer your home or other real property into the trust means they remain in your name and subject to probate.
Mistake #2: Not updating beneficiary designation
Another critical mistake is failing to update beneficiary designations for your trust. When you first create your trust, it naturally captures your personal, family and financial circumstances. However, as life changes, you need to review and adjust your beneficiary designations to ensure they continue to reflect your wishes.
Transferring your assets into a trust gives you great control over your estate’s distribution. It also spares your loved ones from the time, expense and stresses of probate. By steering clear of these missteps in funding, you can ensure that your trust will stand the test of time and carry out your wishes after you are gone.
