One device individuals sometimes use in their estate planning are trusts. There are a great many details involved when it comes to the setting up of a trust. In light of so many details, there are some details that individuals may decide to not give a great deal of attention to when forming a trust. However, this can be quite risky, as the ignoring of certain details can endanger a trust's ability to do what the person forming it intends for it to do. Today, we will discuss some of the important details that individuals sometimes make the mistake of not giving proper attention to when it comes to trusts.
1. Beneficiary designations
Sometimes, a person will desire that the proceeds of their insurance policies will go into and be distributed through the trust. When a person intends for this to occur, an important thing to do is to make sure that the beneficiary designations on the insurance policies are set properly. Unfortunately, this is one of the details that individuals sometimes allow to slip through the cracks.
2. The specific goals of the trust
When forming a trust, individuals often have very specific ideas of what they want the trust to do. However, they sometimes fail to take steps to put the trust in the best position to fulfill these goals. For example, sometimes, they fail to keep these goals in mind when setting up the specific terms of the trust. Also, they sometimes fail to let their family know about what they intend the trust to do.
3. Trustee decisions
There are many questions that arise when picking a trustee for a trust, such as:
- Should I pick a trusted friend or should I instead pick an institutional trustee?
- Should the trust have a single trustee or multiple trustees?
Sometimes, individuals don't give a great deal of thought to these questions and trustee selection in general. However, this can be a very major mistake, as what the trustee situation is for a trust can be very impactful, given the important role the trustee plays as manager of the trust.
An important thing for people to remember is that they can seek out help when it comes to forming a trust. Estate planning attorneys can answer questions individuals have about the above-mentioned details and other important trust details.
Source: The Wall Street Journal, "The Biggest Mistake Parents Make When Setting Up a Trust Fund," July 1, 2014