Common Mistakes To Avoid After Creating A Trust
A trust can be a very effective instrument but only if it is used properly. You will be able to name your beneficiaries, and the trust will then distribute your assets according to your wishes. However, there are several mistakes you can make that can lead to your trust not being as effective.
Not Naming Your Beneficiaries
A trust is a very useful instrument because it can allow you to avoid probate. When you pass away, your assets will normally go through the probate process. However, a trust allows you to instead have your assets distributed as instructed by the trust. For this to be effective, you will need to clearly name who the beneficiaries are of your estate so your assets can be distributed to them.
Not Funding the Trust
One of the most common mistakes made when setting up a trust is not funding it. After your trust attorney has helped you finish your paperwork, you will then want to then begin the process of retitling assets in the name of your trust. Your trust lawyer will instruct you on how to do this. This process is known as "funding a trust."
When retitling assets, you may need to contact certain organizations related to your asset. For example, if you intend to have the assets of a bank account handed over to a specific beneficiary, you must reach out to your bank beforehand. In other cases, retitling is very simple because you will simply need to update your beneficiaries online.
Not Updating the Trust
After creating the trust, you will need to review it and update it regularly. This is because there might be major changes in your life such as a death in the family, a birth, a marriage, or a divorce. The easiest way to keep your trust updated is to schedule to meet with a trust attorney every couple of years to discuss possible changes to your trust.
Not Considering the Financial Reality of the Beneficiary
The purpose of a trust isn't simply to determine how your assets will be distributed. It also is so that you will be able to meet the financial needs of a family member. For example, you will want to consider how long you expect your beneficiary to live and whether there are any ways you want to incentivize your beneficiary.
For example, you might wish to encourage the beneficiary to finish college before they will receive the assets distributed by the trust. By explaining your intentions to your trust attorney, you'll be able to achieve your goals.
Contact a trust attorney for more information.