As an Estate Planning and Trust Attorney who’s been helping families preserve their legacies and avoid probate for over twenty-five years, I’ve seen it all; family squabbles turned to drawn-out legal battles; grieving children having to deal with lengthy and costly probate and surviving spouses left with the results of a bad or outdated Trust.
I cannot stress enough the importance of not just having a Trust, but having one that’s accurate, up to date and valid. If you or a loved one has Living Trust, these 10 warning signs that it may not work as you expect are a must read:
1. The Trust names dead beneficiaries or trustees – you can’t just write a Trust (or Will) and never look at it again! We have seen many trusts that name beneficiaries who have died and the owners of the trust never made updates. To Do: Look at your trust now and make sure all the beneficiaries and trustees and alive and well. This is also a good time to confirm that your trustees are still willing and able to act for you.
2. There is no “pour over” Will – a Living Trust Estate Plan should always include a back-up Will that directs all your assets to your Trust in case something is left out. The backup Will may still require probate, but at least the assets will go into the trust, and be available to your designated beneficiaries. This also allows for any special provisions or restrictions in your trust to take effect.
3. The Trust has a bad asset schedule – one key to a smooth Trust administration is a current, signed and dated asset schedule for the trust. This allows your successor trustee to know what assets are in the trust. This also helps avoid a full probate for assets that are listed in your Trust, but not actually owned by the Trust. A complete asset schedule is not enough by itself – your Trust must also be on title to your real estate, bank accounts and investments (but usually not tax-deferred retirement accounts). To do: Look at your Trust now and be sure all your assets are listed!
4. The Trust is not funded – assets (real estate, bank accounts, stocks, bonds, mutual funds, etc.), that are left out of your Trust may have to go through probate, and may not even go to the same beneficiaries if you don’t have a “pour over” Will. In our experience, when the time comes to administer the trust, we find that most Trusts are missing assets. We have seen many more empty trusts than full ones!
5. The Trustees don’t get along – if you have appointed co-trustees and they cannot work well together, administering a trust can be a nightmare. Even if they work well together, if they live far apart this can be challenging.
6. The Trustees are incompetent – not everyone is competent to handle your affairs. Be sure to select successor trustees who understand how to manage assets, sell property, etc. If you have picked someone who is very good at this, but they become ill, aged, or move away, they may not be competent to handle your trust. Trustees should also be United States citizens. Executors of Wills are required to be citizens.
7. The family can’t find the Trust, or doesn’t know it exists – your Trust (or Will) won’t help your family if they cannot find it when you die. Locking it up in a safe deposit box can be just as good is hiding it away, as banks may require a probate court order to transfer the contents of the safe deposit box! To do: call your successor trustee (or Executor) and let them know where they can find your Estate Plan and be sure they can access it!
8. The Trust is in an old A-B format – older trusts, especially “AB” format trusts, may no longer work well due to changes in the law. If your trust was done before 2012, you may have some work to do. To do: if your trust was created before 2012 contact your Estate Planning Trust attorney and schedule a review.
9. The Trust wasn’t created by an attorney – sorry, if you did your own trust, went to an online Estate Plan Trust service, had a document preparer or other unskilled labor help you, it is probably not going to work the way you would wish.
10. The Trust isn’t signed – We have seen trusts, Wills and powers of attorney that were not signed, witnessed and/or notarized properly, causing the documents to fail. One of the jobs of an estate planning attorney is to make sure this does not happen! To do: Go find your Trust right now and make sure it’s signed! Please!
The death of a loved one is hard enough without inheriting a legal mess. Please, look at your Trust (or Will) now, make sure it is up to date and still makes sense, and contact us if you need a review, or even a second opinion. We’re here to help!