Having a revocable living trust is an important tool when creating an estate plan to avoid the probate process. However, simply having a living trust is not enough. You need to make sure that the living trust is created properly since there are mistakes that can be made that can cause complications. Here are some of those mistakes that you'll want to avoid.

Mistake 1: Failing To Fund The Living Trust

The first step of making a living trust is to draft the legal documents that allow it to exist in the first place. However, you must follow up on the living trust by actually funding it. You would be surprised at how many people take the first step and get the right documentation made but then never take the steps to put assets in the trust. A trust without assets is going to be pretty worthless because all of those assets not in the trust will need to go through probate. 

Mistake 2: Creating A Bad Living Trust

A living trust is based on the documents that you create and are only as good as the words put onto paper. If you do not take the necessary steps to create a living trust properly, then you will have a bad living trust. This includes using all of the correct legal terminology that covers your contingencies, such as what happens if one spouse passes away before the other. A poorly worded trust may create a legal situation where assets can be divided prematurely or in ways that you did not intend.

Mistake 3: Assuming Assets Are Protected

A common mistake that people make is thinking that assets are protected because they are simply in the trust. Know that having a revocable living trust gives you a ton of control over assets in the trust up until you pass away. This means that those assets will not have the same protection as if they were in an irrevocable living trust. For example, the living trust assets could be lost in situations where you go into a nursing home and need to pay for it before Medicaid provides the rest. You also may not have protection from liability, such as if you are sued and need to liquidate assets to pay for damages. 

Need help creating your revocable living trust the right way? You can actually use online tools for creating your living trust that will guide you through the process. Reach out to an online living trust services provider to learn more.

Share