14 Nov Don’t Let Your Estate Plan Fail—Avoid These Common Living Trust Mistakes
Setting up a revocable trust (also known as a living trust) is a crucial step in estate planning. A living trust allows you to manage your assets during your lifetime, and streamline the distribution of your estate after you pass away. Placing your assets in a living trust can also save your loved ones from suffering the burden of a costly and time-consuming probate process.
However, even the best intentions can lead to unintended consequences. One simple mistake could cause your trust to fail, preventing your wishes from being carried out as you planned. In this article, we’ll dive into some of the most common mistakes people make when setting up a living trust, so you can avoid them and protect your legacy.
Four Mistakes to Avoid When Setting Up a Living Trust
1: Failing to Fund the Trust
One of the most common estate planning mistakes is failing to fund a living trust after going through all the effort of setting it up. Funding a trust doesn’t mean simply placing money in the trust—it also means transferring ownership of your titled assets. This includes real estate, bank accounts, investments, and even personal property. Improperly funding your trust by not retitling your assets will cause it to fail, and those assets will have to go through probate instead.
2: Leaving Out Important Assets
When funding a trust, many people end up leaving out assets they assume would avoid probate. You might already know that financial assets like bank accounts and stocks, and titled assets like your home and vehicles are subject to probate. But what you might not realize is that probate assets also include untitled personal and household possessions.
Probate assets can include:
- Family heirlooms (like grandma’s pearls or your Rolex watch)
- Collections (trading cards, artwork, etc.)
In order to transfer ownership of untitled personal property to your trust, you’ll need to create a Transfer document. You can create this document at the same time you set up your trust, or add it to the trust later. It lists all of your personal possessions that you wish to transfer, as well as the beneficiaries who will receive them.
3: Choosing the Wrong Trustee
The successor trustee plays a vital role in managing the trust if you become incapacitated or pass away. Appointing the wrong person as trustee can lead to mismanagement, family conflicts, and even the need for court intervention. Carefully consider your choice and select someone who is capable, trustworthy, and understands your wishes. You should also discuss the role and its responsibilities with the person ahead of time, so they fully understand their duties.
4: Not Updating the Trust
Even if you fund your trust correctly, that doesn’t mean you can just forget about it. You need to update your living trust and other estate planning documents every few years, or after a major life event occurs. Marriage, divorce, births, adoption, and deaths can all change the way you wish your assets to be distributed. Keeping your trust up to date ensures that your property ends up in the right hands at the right time.
Consult an Experienced Arizona Estate Planning Attorney
Estate planning can be a very complicated process, and it’s all too easy to make mistakes if you take the DIY approach. Whether you’re creating a trust or writing a will, using a template you find online could lead to costly mistakes. At Phelps LaClair, we’ll work with you to create a living trust and any other legal documents you need, so you can rest assured your estate plan will be successful when the time comes.
Give us a call at 480-892-2488 today to schedule a free consultation in Mesa, Chandler, or one of our other convenient Arizona offices.