27 Feb Common Mistakes Of A Revocable Living Trust
As the saying goes, experience is a great teacher. Added to two generations of legal know-how, experience has given Phelps law (in Chandler, Mesa, and Phoenix Arizona) tremendous foresight in setting up our clients’ estates for a successful future. We know what works and we know what doesn’t work. In today’s blog we’d love to share with you some insight on common mistakes of a Revocable Living Trust.
What is a Revocable Living Trust?
Like a will, a Revocable Living Trust (abbreviated, RLT) is a legal document that defines your wishes for the handling of your estate after your death. But unlike a will, Revocable Living Trusts that are properly created can avoid the time and cost of probate court after you’ve passed away. While alive, you are the trustee of your RLT and maintain complete control of your assets. After your death, the RLT designates for your heirs exactly how and when you wish for your finances and assets to be distributed. Even after you’re gone, your RLT can maintain ongoing control over the timing of those distributions. For example, a RLT enables you to delay certain distributions for particular family members, designating them to be given after a certain time or in a certain manner.
Common Mistakes of A Revocable Living Trust
In our experience, a Revocable Living Trust has to be set up correctly in order to do its job of effectively carrying out your estate plans. Here are some of the common errors we’ve seen over the years—mistakes you can avoid by using wisdom, common sense, and planning ahead.
- Not including the family business in your estate plan—Dividing up the family business between your heirs can be a challenge if some of your children who have not been involved in the business demand their fair share of its equity. But if instructions have been established through a RLT, your business can be protected from being sold in order to satisfy equal distribution of funds. Your carefully established RLT can delineate clear and fair instructions for the handling of your business after you’re gone, and spare heartache and/or sibling rivalry in future generations.
- Failing to properly “fund” the Revocable Living Trust—Funding a trust means the assets and monies of your estate have all been re-titled in the name of the trust. Your trust may be well written, but in order for the trust to be legal, title and beneficiary designations must be changed to the name of your trust. Otherwise, assets you’ve neglected to properly transfer may end up in probate.
- Doing-It-Yourself—Trusts that are created by using an internet form—or a form from a do-it-yourself booklet that is not specific to your estate—can create legal problems after your death, or even nullify certain parts of your trust. For a successful transfer of your estate the legal and technical aspects of setting up a trust need to be done correctly.
- Not choosing a properly trained trustee to carry out your estate plan—Choosing a trustee who is not mature or responsible, or who is untrained in financial matters, can create problems during the distribution of assets and fulfillment of your wishes. The wrong trustee can cause relational battles among family members and logjams in terms of properly carrying out his or her trustee responsibilities.
- Neglecting To Update Your Revocable Living Trust—If the law changes, you may need to adjust your RLT in order to protect your estate. If your family changes through divorce or death, or birth, to protect your family members those changes need to be reflected in your RLT. Not updating your RLT every few years can create loss of income and send your family into costly, lengthy court battles.
Take time to set up your Revocable Living Trust with professionally trained legal experts. We want to see your estate protected, and your family taken care of after your death. If you already have a Revocable Living Trust that needs to be updated, stop by our offices at Phelps LaClair. We’ll review your estate plan and help you take care of those changes. If you’re new to estate planning, contact us today for a free, experience-filled consultation.
Images used under creative commons license. Commercial Use (2/21/18) Karen Roe