What Can Go Wrong With a Trust?

The websites of financial planners and estate-planning law firms sometimes make it sound like establishing a trust is a solution to all your problems.  They give you the impression that setting up a trust is like building your very own robot assistant that issues checks to your overgrown children and slips through the fingers of creditors and will continue to do so even after you are gone.  Some of these websites even try to sell you a trust as if it is the latest celebrity trend you can copy, something akin to Botox, the paleo diet, or an infinity pool in your backyard.  Trusts are an effective estate planning strategy, even if you are not fabulously wealthy.  Everything is more expensive and more complicated than the promotional content makes it sound, and mistakes in your trust instrument can exacerbate these problems.  A Dade City estate planning lawyer can help ensure that you are setting up a trust for the right reasons and following the correct procedures in doing so.

You Created a Monster, and It May or May Not Be Revocable

The beauty of a trust is that it is legally separate from you; you are creating a monster and giving it its own tax ID number.  Therefore, when you die and your estate goes to probate, creditors can try to collect debts from your estate, but they can’t try to collect them from your trust.  Your pet monster just sits there munching on monster munch, as blissfully unaware of the probate proceedings as they are of it.  All of that monster munch costs money, though; you must pay to establish a trust and to manage it.  Taking a DIY approach to managing your trust is as bad an idea as keeping wild animals as pets in your backyard, as every Floridian knows.

The good news is that you can keep your pet monster on a leash by establishing a revocable trust instead of an irrevocable one.  With a revocable trust, you can modify the trust instrument as many times as you like, in response to changes in your financial situation and that of the beneficiaries.  You cannot change the trust instrument of an irrevocable trust except by dissolving the trust and setting up a new one.

The Trust Vanishes

The worst-case scenario is that your pet monster will scamper away into the swamp, never to be seen or heard from again.  Since your trust is legally separate from you, it is possible to lose track of it entirely; court orders cannot round it up like they can with assets that legally belong to you.  To prevent this, you must stay in close contact with the people who are managing your trust and make it easy for the beneficiaries and successor trustees to contact them after you are gone.

Contact a Florida Estate Planning Attorney About Staying Out of Trouble With Trusts

An estate planning attorney can help you get the maximum benefit out of a trust.  Contact The Law Office of Laurie R. Chane in Dade City, Florida to discuss your estate plan.

Source:

specialneedsalliance.org/the-voice/a-short-primer-on-trusts-and-trust-taxation-2/