Trusts are one of the most practical and versatile financial planning tools you can implement. However, you’ll only get the most out of them if you can avoid common pitfalls. Trusts come in many forms, but we’d like to go through a few types of mistakes that can apply to all of them.
Improperly Outlined Terms
You can only take full advantage of the specificity of financial control that a trust offers you if your trust terms are structured in the right way. It’s far too common for trustees to establish terms which are ultimately unwise. Allowing full access to funds when the beneficiary turns 18, for instance, can be conducive to irresponsible use of funds. Meanwhile, terms may sometimes be unclear or otherwise poorly outlined. Precatory language, for instance, will express a desire for the future management of the assets but may not properly establish legally binding duties. It’s important in many cases to be as direct and detailed as possible.
The Wrong Trustee
Choosing a trustee may seem like a cut and dry decision to some, but this underestimation is why so many grantors are bound to slip up. Selecting family members such as siblings, aunts, or uncles of the beneficiary can be one of the more common missteps, making family tensions and disputes more likely to arise. Duration of the anticipated trust can be an issue if the trustee is elderly. Whether it is a family member or a professional, it is wise to select a trustee with the right experience and impartial professionalism to get the job done properly. Having the bank act as your trustee, while naming a family member as a co-trustee, will include family in the equation while providing the security of legal oversight, insurance, and long-term continuity.
The one thing that virtually all aspects of estate planning have in common is that they involve paperwork. None of them will go according to plan if the required legal documentation isn’t executed as it should be, and setting up a trust is no exception. It’s surprisingly common for grantors to miss crucial legal details, fail to annually review the trust documents in case circumstances call for changes, or even fail to put major aspects of their trust into writing at all, relying dangerously on verbal agreements. Working with a professional estate planning team to outline your trust is a great way to guarantee proper setup.
While trusts are a crucial part of any good estate plan, they are far from the only element that you need to effectively manage. Our team of estate planning specialists is here to help you maximize your wealth and strengthen your legacy, so call 1-833-266-6464 to get started today.