Trusts are some of the most useful estate planning tools. The asset protection benefits and flexibility they offer are almost unparalleled, which could perhaps be the reason behind their growing popularity. However, like every other legal arrangement, everything must be done by the law when establishing a trust.
Otherwise, you risk having your trust invalidated upon a successful contest. The good thing is that you can avoid these pitfalls if you conduct due diligence when creating your trust. These common pitfalls are as detailed below.
1. Not meeting the legal requirements to establish a trust
Certain requirements must be present when creating a trust for it to be legally binding and enforceable in court. For instance, the owner of the trust must have the legal and mental capacity to create one, and they should do so willingly, without duress, fraud or undue influence. Sometimes, a proactive approach (such as having a medical and mental health exam prior to creating the trust, is wise.
2. Improperly funding the trust
A trust is a separate legal entity, and therefore, there are procedures that you must adhere to when transferring property to the trust. A mere word of mouth or a written declaration of your intention to move assets to a trust may not be enough. You must change the title and formally transfer assets to the trust for the change in ownership to be legal. Without assets to its name, a trust is no good to the beneficiaries or the owner.
Secure your trust by getting the proper guidance
Do not take any chances with your estate plans. If you are considering having a trust, it is in your best interests to reach out for legal assistance on what you need to do. That way, you will be sure of a solid document that will withstand legal challenges and help you achieve your estate planning objectives.