Setting up a trust is a crucial step in estate planning, providing you with control over your assets no matter what life throws your way. If you have taken the time to set up a trust, you have already made a significant investment in your future and your family’s financial security.
However, many overlook an equally important aspect: properly funding the trust. This oversight can lead to probate and potential tax issues and may even cause your assets to be distributed in ways you never intended. Here are three common pitfalls to steer clear of when funding your trust.
Mistake #1: Overlooking certain assets
When funding your trust, it is essential to include all important assets, especially high-value and complex ones. Leaving out assets can have significant consequences, as they may still be subject to probate. This could undermine one of the primary benefits of creating a trust in the first place. To avoid this, create a thorough list of your assets and pay special attention to your real estate properties, business interests and investment accounts.
Mistake #2: Incorrect titling of assets
Simply deciding to put assets in your trust is not enough. You must take the time to properly retitle them in the trust’s name. For instance, when transferring your family home in Massachusetts, you need to execute and record a new deed that officially transfers the property from your name to the trust. This proactive approach will help your family avoid potential confusion and disputes in the future.
Mistake #3: Neglecting to update beneficiary designations
Your trust can effectively manage assets like life insurance policies and retirement accounts. However, this is most effective if you update the beneficiary forms with your financial institutions. For example, if you recently welcomed a new grandchild and want to include them in your legacy, reviewing and updating your beneficiary designations is crucial.
Ensuring your trust works for you
Remember, a trust is only as effective as the assets it holds. By being proactive and careful, you can protect your assets, avoid probate and achieve your financial goals.
