Establishing a trust can come with many advantages. The estate planning document can help your beneficiaries avoid the probate process when you are gone and minimize the risk of someone challenging your estate in court. A trust can also assist you in the event of incapacitation when you’re still alive. However, if you don’t establish a trust correctly, it may not do what you intend it to do.
Here are some common mistakes to avoid when creating a trust.
Selecting the Wrong Trustee
One of the first steps establishing a trust is choosing the appropriate trustee. This person will be responsible for managing your trust assets after you are gone. As such, you should appoint someone you know will act in the best interests of the trust and its beneficiaries. If you think that selecting a family member for the job would create too much conflict, consider appointing a professional advisor to serve as the trustee.
Failing to Properly Fund Your Trust
A trust can’t function properly if it is not funded. If you want certain assets to avoid the probate process and go directly to your beneficiaries after you are gone, you must name them in your trust.
Assuming Your Trust is Protected from Creditors
While your trust may be safe from probate, it is not protected from creditors. If you owe debt when you die, your creditors may go after the assets in your trust.
Trying to Create a Trust Without Professional Help
Trusts are complex legal documents, so they are more expensive to establish than wills. That’s why some people decide to go the DIY route to save money. Unfortunately, trying to create a trust on your own can backfire. Trusts contain complicated legal terminology that the average person may not understand. If you don’t use the correct language in your trust, it might not be considered valid in court.
Forgetting to Review Your Trust Periodically
Once people establish a trust, they might think that their job is done. However, it is necessary for most people to update their trusts multiple times throughout their life. Whenever you experience a major life change, like a divorce or birth of a child, give your trust another look.