Common Mistakes When Setting Up a Trust

Trusts are a great way to pass on money or property to your family or loved ones after you’re gone. They can also help avoid some legal headaches. But setting one up isn’t always easy, and people often make mistakes. Here are the most common ones and how to avoid them.

1. Not Picking the Right Person to Manage It

When you create a trust, you need someone to be in charge of it—called a trustee. A big mistake is choosing someone you like but who isn’t good with money or details. If your trustee doesn’t follow the rules or messes up, your trust might not work the way you want. Pick someone responsible who can handle it, even if it’s not your best friend or eldest child.

2. Forgetting to Put Assets in the Trust

A trust is like a bucket—it only works if you put things in it. Some people set up a trust but forget to move their house, bank accounts, or other property into it. If you don’t do this step, called “funding the trust,” it’s just an empty bucket, and your family might still have to go through a long legal process later, called probate. Double-check that your stuff is officially in the trust.

3. Thinking It’s a One-Time Thing

Life changes, and your trust should too. A lot of people set up a trust and then never look at it again. But what if you get married (or divorced), have a kid, or buy a new house? If you don’t update your trust, it might not fit your life anymore. Check it every few years to make sure it still makes sense.

4. Not Telling Anyone About It

You don’t have to tell the whole world about your trust, but keeping it a total secret can cause problems. If your trustee or family doesn’t know it exists or where to find it, they might not use it when the time comes. Or, almost as bad, if what the trust says surprises them, they may fight about it when you pass. Let the key people—like the trustee and beneficiaries—know about the trust and where the paperwork is kept.

Final Thought

Setting up a trust is a smart move to take care of your family, but it’s easy to trip up if you’re not careful. Pick a good trustee, fill the trust with your stuff, keep it updated, and share the basics with the right people. That way, your trust will do exactly what you want it to—without any surprises.

References

• American Bar Association: “Funding Your Trust” – Talks about the importance of putting assets in your trust. (www.americanbar.org)

• AARP: “Why You Should Review Your Estate Plan” – Shows why updating your trust is key. (www.aarp.org)