How to Handle Common Trust Problems

A trust is an estate planning document that disposes of your assets after your death. Trusts are an effective planning tool for those with detailed plans for their worldly goods. Will your trust achieve the purpose for which it was created? Not if you make one of the following errors:

Failure to fund. You have to fund your trust by transferring ownership of your assets from your name to the name of the trust. Assets titled in your name will have to go through probate.

Failing to name a beneficiary. A trust is a contractual relationship established between you as the creator of the trust and the trustee, the person charged with managing the trust. Without at least one beneficiary, there can be no viable trust agreement.

If a beneficiary dies or becomes incapacitated after the trust is created and the trust is not amended or doesn’t address this issue, the trustee may need to seek direction from a court before proceeding with the trust administration.

Failing to protect beneficiaries from lawsuits or divorce. You have the power to draft the trust so that assets are protected from creditors or divorce proceedings for the beneficiaries. This is a valuable protection for your children and grandchildren.

Choosing the wrong trustee. Your trustee should be someone you can genuinely expect to live up to the fiduciary duty, managing your assets and your trust effectively and in line with your wishes.

Failing to put your trust in writing. It’s a common misconception that a trust created orally between family and friends can be legally binding. In fact, trusts that involve real property must be in writing.

Failure to provide a pour-over provision in your will. This clause transfers any remaining assets to your trust when you die. Without this, any assets or property that have not been transferred to your trust at the time of your death will need to be probated and may not be disposed of correctly.

Failure to name a successor trustee. You may find that the person you selected to manage your affairs is not a good manager. Your choices for successor trustees should be family members or friends you can trust. Corporate trustees, such as banks, also are an option.

Pairing sibling trustees. This is not necessarily a mistake but should be considered carefully. Siblings do not always get along and family infighting is the fastest way for your estate to be squandered in court.

Forgetting to review your trusts. This can lead to unwanted consequences, so review what your trust says at least once a year to ensure the terms still align with your overall estate planning goals.

Trusts are versatile and powerful estate planning tools, but only if used correctly. Work closely with qualified professionals and be sure to make your wishes known and ask questions about anything that is not clear.

Do you have questions?

You can count on Ericson, Scalise & Mangan, PC to provide you with sound guidance and experience in these uncertain times. For assistance with your legal needs, please contact us today at (860) 229-0369, or email us at info@esmlaw.com.