5 Common Mistakes When Creating a Trust
Creating a trust is an essential part of your estate planning. Even more important than creating a trust is doing it correctly. A trust with mistakes may invalidate or delay the transfer of assets to beneficiaries. Before you decide to build a trust document on your own, consider these common mistakes when creating a trust.
1. Not funding the trust
When you decide to create a trust, there are several steps involved, and if you miss one, it could impact the validity of the trust. Once you complete the trust, you must also fund the trust. This means transferring the property or funds to the trust so the trustee can administer the trust to your wishes.
Think of it as similar to a bank account. If you have a $0 balance in your bank account, you can’t process any scheduled payments, no matter your intent. So, avoid this common trust mistake by funding your trust when you create it.
2. Not using direct language when stating wishes
The language you use in your trust matters. Another common mistake people make when creating a trust is not using clear and direct wording for their wishes. If the wording comes across as a preference instead of explicit instructions, it could lead to confusion when it’s time for the trust to be carried out or may prevent your wishes from being carried out.
There is legal language that’s essential to include when creating a trust. This validates the trust and provides direct language for your specific situation. If you have unique circumstances or wishes, it’s even more important for your trust to be explicit and leave no room for interpretation. Often, this is difficult when you try to create a trust document on your own. Using a trusted estate planning attorney ensures your trust is legally binding.
3. Not listing beneficiaries
A simple mistake that can cause significant problems is not listing beneficiaries in your trust. Once your trust is created and funded, you must list the beneficiaries who will receive the assets included in the trust. Without beneficiaries listed, your loved ones may not receive the assets you want them to inherit.
When you begin to list the beneficiaries in your trust, double-check that all of their personal information is correct in the trust document, especially the name spellings. It’s also a good idea to set up secondary beneficiaries in case your primary beneficiaries pass away before the trust is administered. So, if your first choice for beneficiaries are your children, a secondary beneficiary could be a sibling, niece, nephew, or your favorite charity.
4. Not updating your trust
A common misconception about wills, trusts, and estate planning is that it is a one-time task. On the contrary, you should continually update your estate plan throughout your life, and the same goes for any trusts. A mistake people make when they create a trust is never updating, or at least reviewing, it as their life stage changes.
As you grow older and your assets and relationships change, your wishes for your trust might change too. These usually coincide with major life events such as divorce/marriage, retirement, deaths, births, and the sale of a business. Taking the extra time to review and update your trust will help ensure your wishes are carried out to the people you intend.
5. Not using an attorney
You’ve probably seen ways you can create a trust on your own in hopes of saving time and money. Unfortunately, a DIY approach to creating a trust often leads to costly mistakes. When you use a trusted estate planning attorney to create your trust you also prevent these other four mistakes from happening too.
The value an attorney brings is ensuring your trust is legally binding, contains all the necessary information, and works with your overall estate plan to protect your assets. The law professionals at Merriman Law Firm specialize in estate planning and creating trusts for the most complex and simple circumstances. Our goal at Merriman Law Firm is to equip you with the best information so you can make confident decisions for yourself and your family. We are here to assist you with any estate planning and trust needs. Set up a free initial consultation with Merriman Law Firm today to discuss how we can serve you.
Creating a legal document like a trust may seem overwhelming at first, but it’s not something you have to go into alone. These common mistakes people encounter when creating a trust often happen because they aren’t advised by an estate planning attorney. It would be very disappointing to discover years or decades later your trust is invalid. So before you create or update your trust, contact the attorneys at Merriman Law Firm to help ensure everything is correct.
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