Reasons Why Trusts Fail
Did you know that trusts can often be touted as one of the most useful estate planning instruments? They can keep an estate out of probate. They can be utilized for tax planning purposes. They can be used as a vehicle for long-term care planning by structuring a person’s assets in a way that makes him or her eligible for Medicaid to cover the expense of a nursing home. Did you know, however, that trusts can also fail?
3 Reasons Why Trusts Fail
Let us take a look at some of the top reasons why a trust fails.
- Trust is not funded. Once a trust is drafted and signed, until it is funded, it is not worth much more than the paper it is written on. All of the assets described in the trust should be moved into the trust in order for the trust to be funded. If the trust is not funded, the trust’s beneficiaries may find that they will receive nothing from the trust. This means that the trust must hold title to all of the assets. This involves changing the deed on your home, the title to cars, boats, RV’s, the ownership of bank accounts and stock certificates intended to be transferred into the trust. Funding a trust can be a critical step in properly establishing a trust, but it is also one that may be overlooked.
- Beneficiaries were not updated. A trust may not be a document that can simply be created and placed in a drawer or safety deposit box. A trust should be updated or, at least, reviewed, whenever there is a significant life change, such as the birth or death of a loved one, a divorce or a remarriage, or even the death of your trustor. All of these life events can impact who inherits from your estate.
- The trust was not updated to reflect current law. Just as beneficiaries may change, so do the laws on trust and estates. Your trust may have been drafted under one set of laws, but there may be new or updated laws at the time of your passing, which have the potential to invalidate portions of your trust. The best solution to this problem may be to work with a good estate planning attorney, who can provide periodic bulletins regarding significant changes in the law, which can alert you to the need to have your trust revised. At any rate, everyone should have their trust periodically reviewed by an estate planning attorney to assure that it is supported by current law.
Despite these risks, trusts can still be one of the most useful estate planning instruments. Our office can assist you in setting up a solid trust that successfully meets your goals. Please call the Law Offices of Clifford M. Cohen at (202) 895-2799 to schedule a time to meet.
Contact The Law Offices of Clifford M. Cohen Today!
Our office can assist you in developing a comprehensive estate plan designed to meet your goals, such as avoiding probate. Please call the Law Offices of Clifford M. Cohen at (202) 895-2799 to schedule a time to meet.