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Common Mistakes Rancho Mission Viejo Residents Should Avoid When Setting up a Revocable Living Trust

Law Office of Jonathan D. Alexander, Esq.

Common Mistakes with Living Trusts

One of the first things we tell our clients is that the key to better protection for your assets is to prepare and fund your trust correctly. If you do not take the right steps, your family may end up in probate court.

Failing to properly prepare will cost you more money. I want you to avoid common mistakes that are made when setting up a living trust centered estate plan. Below is list of common mistakes that you should avoid.

1. Not Funding Your Trust

Many people believe they can sign their trust document and rest easy until they pass away. Keep in mind your trust is not going to do anything for you or your family if you do not fund your trust properly.

Funding involves the transferring ownership of your assets to your trust. The method of transfer typically depends on the asset type.

If you fail to transfer assets to your trust that are subject to probate (real estate, investment accounts, cash, sole proprietorships, partnerships, jewelry, furniture & more) your heir will end up in probate court. While probate court is not evil, it is time consuming and expensive.

2. Leaving Assets Out of Your Trust

Leaving assets out of your trust is one of the most common mistakes on this list. You may leave an asset out for any reason, although people typically just forget. Remember that any asset left out of the trust may have to go through probate, which can be an inconvenience for your beneficiaries.

If you want to avoid as many issues as possible, update your trust periodically and ensure you’re getting all the assets you need there.

3. Not Setting Up Your Trust Document Correctly

You may need to set up your trust document according to your state’s requirements. If you take an online trust form, you may skip some of these particular state requirements, which can invalidate your document in the end.

Additionally, you must ensure your living trust is completing your objectives, which can be avoiding probate, minimize taxes, or others. Regardless of your objective, your trust must include the required information to achieve it.

4. Setting Up a Living Trust and Forgetting About Other Estate-Planning Documents

Living trusts are one of the greatest financial tools for people, but they’re not meant to be a replacement for every other document. While trusts have several benefits for people, they still have some limitations that can be covered by other estate-planning documents, such as a will or a pour-over will.

I counsel my clients to put a comprehensive estate plan in place that is centered around a well-drafted revocable living trust.

5. Failing to Review and Update Your Trust

People tend to forget to update their trust regularly for any changes. Keep in mind your life can change five, 10, and 20 years from now; you may start a family, get a new job, move to a different state, and more.

We recommend people to revise their trust documents at least once every three to five years and every time there’s a major life change for them. If you keep track of your trust as life goes on, you’re going to ensure you’re including new assets and adjusting your status accordingly.

6. Choosing the Wrong Trustee or Not Choosing a Trustee at All

Your trustee must be a capable and mature person in every scenario. Many people make the mistake of choosing a close family member or friend as trustee because they believe it’s the right thing to do. However, if these people don’t know how to manage your estate properly, your family may have to go through some legal issues in the future.

When setting up your revocable living trust you must choose an initial trustee (typically you and your spouse, if married) and a successor trustee. The successor trustee will serve if you become incapacitated or die. Failing to name a successor trustee is a common error that is easily avoided.

7. Not Reading Your Trust Document

It may not seem like a common mistake, but many people do not read their trust documents. There may be some sections of your trust document you do not understand. Any estate planning attorney worth his salt will be able to explain every section to you in plain English.

8. There Any Other Important Estate-Planning Documents

As mentioned before, a living trust cannot replace every other estate-planning document. Some of the most vital estate planning tools include a pour-over will, a durable power of attorney, a HIPAA authorization form, an advanced health care directive, and a property agreement (to name a few).

If you only set up a living trust and forget about the rest, you may lose control over some other important aspects of your last wishes for your family; these aspects include guardians, executors, access to medical records in case of incapacitation, and more.

9. How Can You Avoid These Mistakes?

While there are many mistakes to make while setting up a living trust, they are easily avoided.

If you want to ensure that your living trust is drafted properly, funded, and is designed to minimize tax exposure while protecting your heirs call my office today and schedule a consultation.

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The pandemic had me thinking very seriously about my outdated Will, I contacted the Law Office of Jonathan D. Alexander and he quickly eased my mind about all of the details of my estate and outdated will. He handled every detail from end to end and I was able to complete my Living Trust with no...

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I am so grateful to have been able to work with Jonathan. I knew I wanted to have a Living Trust and I had no idea what to expect going into the process. Jonathan was easy to talk to and explained the process thoroughly of what was required. He was patient with my multiple questions and replied in a...

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