For most people, a living trust can be a helpful estate planning vehicle with numerous benefits – including avoiding probate court at death and incapacity. But if not careful, a small mistake can keep your trust from working the way it was intended. These mistakes can lead to costly probate proceedings or even a transfer of your estate to the wrong beneficiaries! Here is a look at five common mistakes people make when creating their living trust:

1. Not properly funding your living trust

A living trust can only control the assets you put it in. This seems pretty straightforward – but the problem lies here: you can have an incredibly well-written trust that contains all of your instructions, but unless you go and change title and beneficiary designations to the name of your trust, it means nothing! It’s important to be sure you don’t stop short in the funding process, otherwise the assets that you missed will end up going through probate, defeating the point of using a living trust.

2. Having a poorly prepared living trust

Though it’s hard to deny the appeal of saving a buck, cheap online or DIY living trust forms are not always worth it. This is not to say you shouldn’t ever use them – others have created their own living trusts quite successfully. But if you’re unwilling to do the full extent of research that is required, you could end up with improperly prepared documents that either don’t work the way you intend, or don’t work at all. Going with an experienced estate planning attorney in your area can provide you with well-prepared documents as well as their counsel. Spending more upfront could help your trustees avoid an even costlier probate process.

3. Not carefully choosing your successor trustees

Many people name one or more of their children as successor trustees and consider the job done. But this might not always be the best answer. It’s important to consider all possible options, as not everyone is up to the task of managing and eventually distributing the assets from your living trust. Know what your trustee will be called upon to do and analyze your unique circumstance. If it is a simple living trust, a child or family member as successor trustee may work out fine. But for more complex situations, a corporate trustee could be the better answer. While professional management can be expensive, you receive their knowledge, experience, recordkeeping and unbiased decision making skills that you would most likely not receive from a family member.

4. Thinking your trust is safe from creditors

Just because your living trust is safe from probate does not mean it’s safe from creditors. For a revocable living trust, there is no legal difference between the trust and the individual who created it. Even though a revocable living trust is a legal entity, you can transfer assets in and out of the trust at any time. If you do take out any assets, they would be back in your name – which is how creditors can justify getting to your living trust assets.

5. Not keeping your trust up-to-date

Living trusts are created as a reflection of your personal situation at one point in time. Because laws, family and financial situations are continuously changing, it’s important to frequently review your trust to keep it updated. Some life changes that should be addressed in your trust include: relocation to another state, changes in estate tax laws, marriage, divorce, birth of a child/grandchild, death of a beneficiary, and many more changes that your attorney can help you address.

At Walsh & Associates, we are a comprehensive financial advisors, and reviewing your estate plan is an important part of our job. If you are concerned about the state of your living trust, or are looking to create a living trust, we highly advise that you get in touch with your attorney and financial advisor.

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.