Creating an estate plan can be an incredibly overwhelming process. However, doing so is integral to protecting assets, avoiding the probate process, and providing long-term financial security for your loved ones and beneficiaries. As such, if you decide to create a trust fund, it’s also in your best interest to familiarize yourself with the most common mistakes people make during this process so you can avoid them and ensure your assets and beneficiaries are protected. Common mistakes include failing to fund the trust, appointing the wrong trustee, or failing to account for significant life changes. The following blog explores what you should know about these issues and the importance of working with St. Louis wills & trusts lawyers to help you through these complicated matters.
What Trust Fund Mistakes Are Most Common in Missouri?
There are a number of mistakes that those looking to establish a trust fund can make that will negatively impact the effectiveness of this document. In Missouri estate planning, improperly funded trusts, outdated beneficiary information, and inadequate appointment of a trustee can result in the failure of a trust to act as intended. Unfortunately, these can result in exposure to probate, delayed beneficiary distributions, and conflict among family members.
What Happens if You Fail to Fund a Trust?
One of the most common mistakes that people make when creating a fund is failing to properly fund the trust. Unfortunately, many people assume that as long as they write the terms and conditions of the fund, that is enough to protect their assets. However, assets must be formally transferred or retitled in the name of the trust.
Failure to retitle the property can result in these assets going through probate.
- Missouri probate courts typically only recognize assets formally owned by the trust
- Improperly titled assets can cause delays in distribution
- Probate may increase the costs of administering the estate
- Incomplete funding essentially undermines the purpose of creating a trust
- Beneficiaries can suffer avoidable legal complications
Why Failing to Update a Trust Can Create Problems
Another common mistake that is often made is failing to update the trust fund as your life changes. As you go through changes, like marriage, divorce, the birth of a child or grandchild, and the acquisition of new property. Life changes that often warrant an update to a trust fund include:
- Marriage
- Divorce
- Birth of a child or grandchild
- Death of a beneficiary or trustee
- Considerable changes in finances
- Acquisition of or sale of property
- Moving to another state
Failure to update and review your trust funds can impact how these assets are divided and who receives them.
If I Choose the Wrong Trustee, Will This Ruin My Plan?
One of the most common mistakes that people make when creating a trust, however, is naming the wrong trustee. When you establish a trust, you’ll find that you’ll need to appoint someone as a trustee. This person is responsible for managing the trust, including making important financial decisions on behalf of the trust fund.
This person will need to make investments, distribute funds, and ensure that they act in the best interests of the trust fund rather than prioritizing their own interests. Because a trustee is responsible for a number of important financial decisions, choosing the wrong person to serve in this role can have significant impacts on the effectiveness of your estate plan.
Trustee Responsibilities
- Managing investments
- Distributing assets held in the trust to beneficiaries
- Handling tax-related matters
- Protecting trust assets
- Acting with fiduciary duty in accordance with Missouri law
- Keeping detailed financial records
- Communicating with beneficiaries
What Makes Someone a Poor Trustee?
Unfortunately, choosing the wrong entity to serve as your trustee can result in conflict, financial issues, and legal disputes between family members. As such, potential trustee concerns include:
- Lack of financial experience
- Personal conflict
- Dishonesty or lack of trustworthiness
- Inability to remain impartial
- Emotionally-driven decision making
Should You Choose a Family Member or Professional Trustee?
It’s important to understand that generally any adult who is not mentally incapacitated can serve as the trustee of your fund. Many in St. Louis and the surrounding Missouri areas choose to appoint:
- A family member
- A trusted friend
- A bank or corporate trustee
- A financial professional
The right choice for your needs will ultimately depend on:
- The size and complexity of the estate
- Family dynamics
- Investment complexity
- Long-term management needs
- Potential conflicts among beneficiaries
Contact an Experienced Missouri Estate Planning Attorney Today
At Stobie Family Law Group, our firm understands how important planning for the future is, which is why we will do everything in our power to ensure you understand the different options available to you during this time. When you need help, contact our firm today to learn how we can assist you in creating a trust fund.
