Mistakes to Avoid When Developing a Trust

Mistakes to Avoid When Developing a Trust

Trusts can be powerful estate planning tools, allowing certain assets to be transferred to beneficiaries according to specific terms. While trusts can provide a number of estate planning benefits, however, if some of the common mistakes noted below are made, trusts can fail to offer the protections and benefits intended.

To help people avoid making these missteps, below are some of the more prevalent trust mistakes to sidestep.

  1. Not funding the trust – Once trust documents have been devised, funding the trust will be important to ensuring that trust actually has something to manage and control. Without funding, the trust will essentially be useless (as there will be no assets to oversee), and those assets intended for the trust (but never transferred to it) will likely have to pass through probate.
  2. Failing to provide explicit instructions for the trust – It’s not enough for a trust to hold assets; the trust also must have some specific directions for what is supposed to happen with or to these assets over time. In other words, the grantor (i.e., the person developing the trust) should provide some directives regarding how and when the assets are to be invested, distributed, etc. Without these details, the trust may confer questionable (if any) legal obligations.
  3. Failing to identify beneficiaries – Assets are held by trusts in order to be distributed (at some point in the future) to certain beneficiaries. If, however, no beneficiaries have been identified, again, the legal validity of the trust can be thrown into question.
  4. Selecting an inappropriate trustee – The person who oversees the trust (i.e., the trustee) should be someone who is trustworthy, organized and responsible. Choosing the wrong trustee can mean that the trust ends up being mismanaged. While this can cause problems for beneficiaries and compromise the assets intended for them, it can also lead to trustees being sued (for breach of fiduciary duty).
  5. Failing to update the trust as circumstances change – This is also referred to as “setting and forgetting,” and it happens all too often. Failing to revise trusts as situations evolve over time can end up leading to any of the above problems, which ultimately can mean that the trust does provide the protections or benefits a grantor had intended.

Contact the Trinidad and Pueblo Estate Attorneys at Gradisar, Trechter, Ripperger & Roth

If you need help developing a trust or resolving any estate planning matter, the Trinidad and Pueblo estate attorneys at Gradisar, Trechter, Ripperger & Roth are ready to provide you with the highest quality legal services.

To learn more about our superior legal services and how we can assist you, contact us by calling (719) 556- 8844 or by emailing us using the contact form on this page.

From our offices based in Pueblo, we represent clients in Trinidad, La Jara, Lamar, Walsenburg, Alamosa and throughout the state of Colorado.

Categories: Estate Planning, Trust Administration