Living Trusts: Common Mistakes

The Shirvanian Law Firm is often hired to clean up other estate planning documents drafted by inexperienced practitioners.  Here are 5 common mistakes to avoid:

Choose Wisely – Keep It Simple – Be Clear – Remember to Fund – Update and Review

Choosing the wrong Successor Trustee:  during your lifetime, your living trust will name you and/or your spouse as Trustee of your estate, which is why we can call your trust a “Living Revocable Trust.” During your lifetime, you manage, control, and determine what happens with your estate. However, after your lifetime, your successor Trustee will take the lead and administer your estate.  This person should be someone you absolutely trust. We mean, without question, TRUST! Choose wisely.

Having multiple Successor Trustees:  in your Living Trust situation, having multiple successor Trustees serving at the same time will create a “Co-Trustee(s)” situation, where often time disagreements will arise creating standstills.  Although your Living Trust document can provide for language dealing with this specific situation, i.e. majority vote will prevail, we do not recommend having multiple people serve as Co-Trustees because 9 times out of 10 there will be disagreements that will delay the Living Trust administration process. Keep it simple.

Specifying Gifts:  if you intend to gift something or a piece of property to someone, whether it be a child, sibling, or parent, do so in your living trust by specifying it in writing.  When your wishes are in writing, they can’t be successfully challenged at a later time in Court, generally speaking. If Johnny is to receive your classic car, your watch collection, or if Jane is to  receive your Chanel bag collection, specify it in your Living Trust.  Be clear. 

Forgetting to Fund:  arguably the most important aspect of estate planning is called “Funding.” This refers to transferring your assets into your living trust, either by way of trust transfer deed, re-titling bank accounts, updating IRA/Insurance beneficiaries, etc. An experienced lawyer will help you with this process, and we provide you with a very clear and easy to follow checklist. If you don’t transfer your assets into your living trust, you run into trouble. If you have recently re-financed, did you know that your lender likely required you to take your trust home out of trust to close your loan? Did you call your lawyer to replace that house into your living trust? If you didn’t, your house will likely not run through your Trust. Scary and costly mistake. Remember to Fund.

Updating your estate plan:  look back over the last few years. How different is your life estate now versus then? Do you still have the same property? Did you purchase new assets? Are your kids now over 18? Many things happen over the course of time that can affect your estate plan. We like to meet with our clients once a year to go over their estate plan and living trust. Update and Review.

We hope these 5 tips provide you with some information to think about either during or after your estate plan is drafted.  If you have any questions, please call the firm at (818) 835-5396 or email us at info@shirvanianlawfirm.com.

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