Living trusts have numerous advantages that many are failing to utilize. Not capitalizing on living trusts is one of the top estate planning mistakes according to Forbes in, “7 Big Estate Planning Mistakes – Not Making Full Use of A Living Trust”, the fourth in a series of articles. This mistake stems from misunderstanding what it means to have a living trust and its benefits. So, first, let’s clarify how it works.
A living trust, typically set up by you and your spouse, is what most of your assets are transferred into once you establish it. You and your spouse will serve as co-trustees. The main difference once your assets are placed in the living trust is your title. You are no longer an owner as an individual, but instead as a trustee, yet you still have full control over these assets and manage them as you did previously.
There are many advantages of living trusts if they are used correctly. One is that the assets titled into the trust avoid probate. Once the trustees pass, the successor trustee(s) take over managing the trust and assets within and follow what is directed in the trust agreement, be that distributing assets to heirs or continuing to manage the assets as before, etc. Since the terms of the trusts and assets within it are not public record (like a will), a living trust is a great privacy tool.
If you were to become disabled, but ownership of your assets belongs to a living trust, then the successor trustee can take your place and manage the assets.
The most common mistake with living trusts, aside from failing to take advantage of them, is not transferring legal title of assets to the trust. This is also known as “funding” the trust. People will fail to fund it properly one they have established the living trust with their estate planning attorney. In doing so, the assets that should have been titled into the trust are now likely going to go through probate and the terms of the trust will not have jurisdiction over the assets.
While the work of retitling deeds and reregistering titles can seem daunting, the advantages could be greater. Work with your estate planning attorney to be positive you have done all the necessary work to fund your living trust. The best course of action is to have the estate planning attorney and their firm’s team complete the alignment of all assets and “verify” that all financial institutions have documented the change in ownership or beneficiary designation properly.
We at the Family Estate Planning Law Group have been “funding” trusts, aligning assets consistent with estate plans, verifying assets are aligned, and continually tracking asset alignment during our client’s lives since the 1990s. Our strong belief is that, if assets are not tracked during life, the estate plan will not work and the client’s family will not be taken care of at death. In addition, to ensure the success of your living trust, meet with your successor trustees to get on the same page about the assets, and bring in the others on your professional team to guarantee the success of your living trust. At Family Estate Planning Law Group, we offer a Family Meeting as part of our planning process. Making sure that each aspect of your estate is carried out smoothly is important to us, so we make sure lines of communication are working efficiently. After all, once you have passed it is those living who will carry out your wishes.
For more information on the importance of asset alignment, verification, and tracking, or to learn about other estate planning topics, visit our website today and schedule your consultation!
Reference: Forbes (February 28, 2018) 7 Big Estate Planning Mistakes – Not Making Full Use of A Living Trust