Any ad that you see on TV or in print offering living trust programs at deeply discounted prices are likely offering incomplete estate planning packages that don’t take all the steps needed for the proper disposition of assets at death. A living trust may be needed, but there are other components to a complete estate plan. You should work with a qualified estate planning attorney to discuss other needs, such as a will. Every estate plan should include a will which, at minimum, names a personal representative (or executor) and beneficiaries. An estate plan with a trust may include a “pour-over will”—this is a catch-all for any property inadvertently missed in the trust. It designates the living trust as the beneficiary.
Any estate plan requires periodic reviews; life can change things. Plus, all living trusts must be ‘funding’ in order to work as designed. That means that all real estate, bank accounts, and other investments must be transferred into the trust. If you miss this step, it’s a trust with nothing in it which means that probate required; in other words, the very thing you were trying to avoid happens. If the discounted offer did not include a will, your property would pass by intestate succession.
Here are few other major errors made in living trusts that can lead to future disaster:
- You don’t create the trust's 'safety net': a will. As mentioned, this is a big mistake. A will designates your trust as the beneficiary of any assets that might have been overlooked as part of the funding process or purchased years later without designating the trust as the owner. With no will, there is no personal representative named. This means that any interested party can be appointed as the "administrator”. The interested party could be a stranger to the family, who didn’t know the deceased and isn’t required to follow the family’s wishes.
- You don’t title the property properly in the trust. This is such a critical step that my firm assist our clients with the transfer of assets into their trust as an integral part of our process.
- You mix up an irrevocable trust with a revocable trust. An irrevocable trust can’t be revoked or terminated by the person who created it, and there are limited situations when an irrevocable trust is the right option.
- Attempting to avoid probate can many times be far more expensive than processing a will. Speak with an experienced estate planning attorney about what trusts might be right for your situation, and be wary of “one-size-fits-all” trust programs. Call us at 757.259.0707 or 'request a consultation' today.
Reference: My Primetime News (August 1, 2017) “Hazards of Living Trusts”