You might be in the midst of reviewing your estate plans when you arrive at the conclusion that you need to add a few trusts. Trusts are very useful planning tools that can help you to protect your estate and loved ones’ inheritances. But they are not ideal for every situation or person.
Take a few moments to review some mistakes to avoid with trusts to prevent issues with your estate plans and end-of-life wishes.
Using the wrong type of trust
There are several different kinds of trusts you can use for estate planning. Each trust has a different purpose. For example, if you plan to apply for Medicaid in the future, you might want to avoid having a revocable trust. Although you want to preserve your assets and ability to manage them, any assets you fund into that particular trust are still yours and may affect your eligibility for Medicaid. A better strategy would be for you to create a special revocable trust for Medicaid.
Not funding trusts
Estate planning is not a task that you should complete all in one sitting. You might find it easier to break it up into increments to lower the chances of you overlooking something. When creating your trusts, you should fund them right away. The longer you wait to transfer the appropriate funds and assets into your trusts, the greater the possibility that you will forget to do it.
Unfunded trusts are not very useful. You may have a will that also details where your assets must go, but everything might have to pass through probate court first before disbursement according to your will. If you do not have a will, the probate court will decide who should receive your assets.
You should always review your estate plans for accuracy. You might also want to have an attorney review them to ensure you are using the right trusts and have properly funded them to protect your legacy.