One of the primary reasons that people create a “living trust” is to avoid probate. What can go wrong with a “living trust”? How can it still wind up in the probate court?
Reason one: The creator of the trust (the “trustor” or “settlor”) tried to do it himself without any assistance.
Saving money is a great idea. But when it comes to creating a living trust, you need SOME help. If you don’t cross all the “t”s and dot all of the “i”s, then you might just be shooting yourself in the foot.
“He who represents himself has a fool for a client” (Abraham Lincoln).
The question of whether you need to hire an expensive attorney, or choose to utilize a cost-effective alternative, is discussed throughout this website (Living Trust Advocate). But one thing’s for sure … don’t DIY … without any assistance.
Reason two: The named “trustee” (person who technically owns title to all trust assets) fails to carry out the duties imposed upon him/her by the terms of the trust. For example, the trust may require that certain income or principal of the trust be paid to an individual (beneficiary), but the trustee lacks the know-how to perform that task. If the trust failed to name a successor trustee, then a petition may need to be filed with the court to appoint another trustee who is qualified to act.
Reason three: The trustee commits fiduciary abuse by misappropriating trust assets. Unfortunately, this occurs much too often. A trustee has one primary duty: to do exactly what the trust tells him/her to do. Unless the trust grants specific authority, a trustee has no legal right to use trust assets for personal use. But an unscrupulous trustee can take advantage of the family trust by, for example, withdrawing and pocketing money from a trust owned bank account. Such a dishonest trustee can mortgage a trust-owned house and pocket the loan money. When such wrongful acts are discovered, the matter may need to go to court to remove the thief, seek reimbursement, and appoint a new trustee.
Reason four: Undue influence over a mentally incapacitated trustor. The trustor is the person(s) who contributed property to the trust and decides who will receive the trust assets when the trustor passes away. As the years go by and the trustor grows older, their mental capacity may diminish to the point where they are susceptible to undue influence. An unscrupulous caregiver or friend may intentionally manipulate the elderly trustor into amending the trust to add the caregiver/friend as a beneficiary and disinherit the trustor’s originally named beneficiaries. If this occurs, then the matter must be submitted to the court to invalidate the improper changes that were made to the trust.
Reason five: The trust was never “funded”. In order for a trust to be valid, it must own something. Many do-it-yourselfers neglect to identify the assets that are to be owned by their trust. Upon the trustor’s death, the beneficiaries may learn that title to the home was never transferred into the trust.
You may want a cost-effective alternative
Take Lincoln’s advice. If you’ve got a relatively small estate (like millions of other families), then you don’t necessarily have to hire an expensive attorney to prepare your living trust.
There’s a cost-effective alternative – one that can save you more than a thousand dollars – or more – yet still provides a safe, legally enforceable trust that ensures that your wishes will be carried out when you die.
But first, please keep reading all of the pages in this website. There’s plenty of information here to bring you up to speed on the ins and outs of living trusts.
Then, armed with this newly acquired knowledge, you can consider whether a cost-affective alternative is for you. If you’re interested, then click here.