Don’t Let These Living Trust Mistakes Cost Your Family Thousands in 2024

Creating a living trust is one of the smartest financial decisions you can make to protect your assets and ensure your loved ones avoid the costly probate process. However, many people rely solely on a will or don’t have an estate plan in place, leading their estate through the lengthy and expensive probate process. Probate can take 12 to 18 months and eat up to 20% of the estate’s value. Even worse, many families who do create living trusts still end up in probate court due to critical mistakes that could have been easily avoided.

As estate planning attorneys serving Long Island families, we’ve seen firsthand how these common errors can derail even the best-intentioned estate plans. Here are the five most critical mistakes to avoid when creating your living trust in 2024.

Mistake #1: Failing to Properly Fund Your Trust

This is the number one mistake we see at Guideway. Creating a living trust without transferring assets into it leaves the trust empty. People assume that simply having the trust document provides protection. If you have signed your trust agreement but have not changed titles and beneficiary designations, you are unlikely to avoid probate. Your trust agreement and trustee can only immediately control the assets you have put into the trust. You may have a great trust, but until you fund it (transfer your assets to it by changing titles or provide for transfer by beneficiary designation), it does not control anything.

Funding your trust means transferring your assets from you to your trust. To do this, you physically change the titles of your assets from your individual name to the name of your trust. This includes real estate deeds, bank accounts, investment accounts, and other valuable assets. The fix: Review your trust funding every 3-5 years. Create a checklist and update it whenever you acquire new assets.

Mistake #2: Losing Assets During Refinancing

A particularly costly mistake occurs when homeowners refinance their property. The person who set up a trust refinances their primary residence or other real estate, and the property gets removed from their trust at the loan closing. Many title companies aren’t familiar with trust requirements and will retitle the property back to your individual name. The fix: Always verify after any refinancing that your property remains titled to your trust. If it doesn’t, immediately execute a new deed transferring it back.

Mistake #3: Using Generic Online Templates

A poorly drafted trust can lead to significant problems. Online templates often lack crucial provisions, such as spendthrift clauses, special needs trusts, and detailed legacy planning. A comprehensive trust should protect beneficiaries, provide for special needs without jeopardizing government benefits, and ensure your wishes are carried out effectively. As a legal document, however, a trust needs to be carefully drafted with precise language and state-specific provisions.

Mistake #4: Choosing the Wrong Trustee

Naming your beneficiaries as trustees can lead to conflicts of interest and poor management. If beneficiaries have access to the trust’s assets, they may make decisions that aren’t in line with your wishes. Consider appointing a third-party trustee, such as a trusted advisor or a professional fiduciary, to manage the trust impartially and protect the beneficiaries.

When selecting a trustee, avoid those with personal biases, conflicts of interest, or insufficient time and resources to fulfill their duties properly. The wrong choice can lead to mismanagement and family disputes that defeat the purpose of your careful planning.

Mistake #5: Forgetting to Update Your Trust

Life changes like marriage, divorce, births or deaths can affect your estate plan. Failing to update your trust could lead to unintended distributions or exclude important beneficiaries. As a general rule, make it a habit to review your trust annually—maybe on your birthday to make it easy to remember. Above all, don’t make the mistake of tucking your trust away and forgetting about it. A little maintenance every once in a while can save a lot of stress down the line.

The Importance of Professional Guidance

Omitting professional advice is a major mistake when setting up a living trust. Consulting a living trust attorney provides tailored guidance for estate planning, ensuring that specific legal requirements are met. These attorneys are knowledgeable about tax laws and can recommend strategies to minimize taxes related to your estate.

At Fratello Law, we understand that the legal services we provide our clients are not only important – they impact the lives of our clients and their loved ones. That’s why professionalism must be carefully combined with the empathy and compassion our clients deserve. Our experienced Long Island lawyers and staff take pride in focusing on each client’s individual needs and taking the time to understand those specific needs.

Whether you need assistance creating a new living trust or reviewing an existing one, working with a qualified Wills and Trust Attorney Smithtown ensures your estate plan is properly structured and maintained. There is never a fee for an initial consultation at Fratello Law. Along with office consultations, we also offer consultations by telephone, video conference (Zoom), and at home for homebound clients. We visit clients in rehabilitation centers, hospitals, nursing homes and assisted living residences. We are available early morning and after-hours in an effort to be available when you need us most.

Take Action Today

Don’t let these common mistakes undermine your estate planning goals. To ensure your trust performs as it was intended, timely and proper funding is vital. Many people assume that once they sign the trust documents at their attorney’s office, they are ready to roll. Setting up a trust, however, is only half of the solution. For a revocable living trust to take effect, it should be funded by transferring certain assets into the trust.

A properly created and funded living trust can save your family thousands of dollars in probate costs, protect your privacy, and ensure your wishes are carried out exactly as intended. By avoiding these five critical mistakes and working with experienced estate planning professionals, you can create a robust estate plan that truly serves your family’s needs for generations to come.