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The 4 Biggest Mistakes People Make When Setting Up a Trust

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The 4 Biggest Mistakes People Make When Setting Up a Trust

August 15, 2022
Geoff Hoatson

A trust is a legal arrangement which allows a third party entity to hold assets on behalf of the beneficiaries. They are generally established in order to protect the assets of the trustor. Moreover, trusts provide the additional benefit of saving time, reducing paperwork, and reducing or entirely eliminating any estate or inheritance taxes.

It is important to keep in mind that, while a trust is an important component of the process of estate planning, it accounts for only one of many aspects of future financial security for you and your loved ones.

Below, our experienced trust attorney at Family First Firm discusses four common mistakes people make while setting up their trusts.

1. Creating the Wrong Kind of Trust

Since so many different kinds of trusts exist, how do you know which one is right for you? Firstly, we must establish who is eligible to create a trust in the state of Florida. You (as the grantor) can create a trust under certain conditions, which must include the following:

  • The grantor has the capacity and intent to create a trust
  • The trust has a beneficiary OR
  • The trust is charitable, for the care of an animal, or for a defined noncharitable purpose
  • The named trustee will perform certain duties to execute and disburse the trust assets according to the provided instructions
  • The same person is not both sole trustee and sole beneficiary of the trust

Types of trusts can include, among others:

If you choose a revocable trust, you can move assets into and out of the trust. However, keep in mind that these assets do count toward personal asset value when trying to collect Social Security or Medicaid assistance to pay for long-term care late in life.

Any assets in a living trust are protected from going through probate and will be disbursed according to your wishes by the trustee or executor.

An irrevocable trust protects your assets as soon as they transfer into the trust. However, there are limits on how you can make adjustments or withdrawals from the trust. It used to be that you could not make any changes at all.  However, advancements have allowed us to create ways of having protection while still having some control.

Getting the experienced advice of a trust lawyer can help you determine what kind of trust will work best for you to protect your assets. Trusts can help anyone manage their assets, regardless of the size of the estate.

2. Making Mistakes While Crafting the Trust Document

Mistakes in the documentation process of a trust will invalidate the trust. Experienced trust attorneys complete this paperwork frequently and can help you ensure that your trust meets all legal requirements.

A trust attorney will also know what federal laws and taxes may affect the creation of your trust. For example, how will your mortgage affect your ability to include real estate assets? What if you die before paying property taxes for the year? Can local, state, or federal agencies pursue taxes on real estate in a trust?

An experienced trust lawyer can answer all these questions and more as you file the necessary documents.

3. Underfunding the Trust or Forgetting to Transfer Assets into the Trust

After filing the documents to create a trust, you must transfer ownership of the assets into the trust’s name. For example, if you’re adding your home to the trust, you need to transfer the deed. Some trust types, like an irrevocable trust, even have their own tax IDs and are considered separate legal entities.

One of the best things about working with the Family First Firm is that we handle all of this for you!

4. Selecting the Wrong Trustee

Your trustee will execute the trust and distribute assets to your named beneficiaries according to your wishes, as long as you denote instructions. However, If you don’t leave specific instructions, the trustee is tasked with distributing assets among your beneficiaries according to their assumption of your desires.

A sad reality that we see occur time and time again is when a trustee fails to live up to the expectations of executing a trust fairly or cannot perform the duties of a trustee for some other, unrelated reason. It’s important to consider naming a backup or successor to act as trustee if your first choice can’t uphold their responsibility.

Contact Us at Family First Firm for a Trust Lawyer in Florida

Have you recently searched online for “lawyers that do trusts near me?” At the Family First Firm - Medicaid & Elder Law Attorneys, estate planning and every component the term implies is part of our narrow legal focus, including trusts. We have helped countless clients in the state of Florida achieve a peace of mind regarding their financial future, and that of their loved ones. Our team is ready to guide you through the intricate process of creating a trust, according to your specific needs.

Don’t wait, call us at (407) 574-8125 in Orlando, FL, or fill out our contact form to speak to an experienced trust attorney today!

Copyright © 2024. Family First Firm - Medicaid & Elder Law Attorneys. All rights reserved.
The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.
Family First Firm – Medicaid & Elder Law Attorneys
(407) 574-8125
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