3 Common Issues with Trusts – and How to Correct Them

Living Trust and Estate PlanningThinking about the inevitable is not something anyone looks forward to, but it is in your best interest to do so – especially if you have family or assets you want to protect.

Estate plans often fail what they are designed to do because they contain severe errors. These errors render them practically useless, and the victims of these mistakes are the heirs to your estate – because the inconsistencies are typically not discovered until it is too late.

If you are setting up a trust as part of your estate plan, there are a few issues seen with these items that must be avoided if you want to truly protect your loved ones.

Assuming a Trust is a Set-it-and-Forget-it Situation

Assuming that your work is done just because you have established a trust is grossly inaccurate. Creating a trust and signing it is really just the first step. From there you must transfer your assets into the trust, because a trust is not valuable if it holds no assets. A financial planner can work alongside your attorney to help you do just that. But even then, your work is not complete.

Each year, you need to review your trust. Look for new assets to add, and include a “pour over” will just in case. These documents ensure that all acquired assets after the trust is established falls into the trust.  This would include any subsequent assets obtained – such as jewelry or motor vehicles.

Beneficiary Designations Do Not Count

Remember when you created your retirement account or established your brokerage account? You had to name a beneficiary. Known as beneficiary designations, those names are permanent and separate from your will or trust.

The party you signed on those documents is the person that will receive the inheritance from your retirement or brokerage accounts.  So if you later create a trust or estate plan and attempt to name a new person as the beneficiary of those accounts, that alone will not work.  The beneficiary designation on your retirement or brokerage accounts will trump your trust or estate plan.

Creating a Trust Schedule

It is important that your child or children do not receive money before they are ready. Therefore, you need to create a trust program, which allows the trustee to give assets in increments to the beneficiaries. For example, you have a $1 million trust. You can distribute one-third of that $1 million by the time the child is at age 30, then another half at age 35, then the remaining balance by age 40.

Just be sure to talk to your children about the fixed schedule so that they understand they will not receive their full inheritance at once.

Speak with an Estate Attorney about your Trust

The best way to avoid common issues when creating a trust is to do so with an attorney’s help. An attorney knows the common pitfalls that can thwart your intentions, and can ensure that your estate plan is error free. Also, the fewer errors you have, the less likely it is that your heirs will have to endure estate plan disputes in the future.

To start the process of setting up a trust, contact the Law Office of Andrew M. Lamkin, P.C. today for a free consultation. You can schedule your appointment now at 516-605-0625 or request a free consultation online.

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