facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast blog external search brokercheck brokercheck
%POST_TITLE% Thumbnail

Military Finances 301: Avoid These Blunders When Setting up a Living Trust

Estate Planning

It’s hard to think about the end of your life while you’re still in your prime. But the facts don’t lie. Statistically speaking, the younger you are, the more unprepared for unexpected death or incapacitation you’re likely to be. In fact, while 81 percent of adults 72 and over have a living trust or will, that number drops to 60 percent of 53 to 71-year-olds and continues dropping to only 36 percent for those between the ages of 37 to 52.1 While it can be hard to confront your own mortality when it feels far away, creating a living trust now can help reduce headaches later. And if you’re interested in streamlining the process for your beneficiaries, handling the distribution of your assets through a living trust can often be a cost and time effective option.

If you’re setting up a living trust, avoid the following mistakes to help you and your trustees benefit from the full advantages this document has to offer.

1. Choosing the Wrong Successor Trustee(s)

While your adult children may be the obvious choice, they may not necessarily always be the best choice to serve as your successor trustee. It’s important that the person or people you put in charge of your trust are responsible, (preferably) younger than you, and committed and able to execute your wishes. Sure, your children may check all the boxes, but if they’re located across the country or preoccupied with raising families of their own, they may not be in the best position to handle your estate. Whoever you choose to entrust with the distribution of your assets, make sure they’re comfortable with this decision as well. Trusting this person completely means you’ll feel confident leaving them with your assets either after death or if you become incapacitated during your life.

2. Neglecting To Disclose All Assets

Living trusts are documents designed to expedite and simplify the distribution of your assets after death. If you’re not outlining all assets and items under ownership in this document, your trustees are likely to hit some roadblocks. This can quickly lead to expensive tax implications, probate costs, or a delay in the execution of your wishes. To help combat the risk of neglecting certain assets seek professional assistance in drafting your living trust.  You want to be sure you have power over your legacy and your living trust works how you had originally intended it to. If you own real estate in several states it is very important to include them or your estate will be subject to probate in several states.

3. Leaving Out a Residual Clause

Think of a residual clause as a sort of “safety net.” While it’s not airtight, incorporating a residual clause into your living trust can help you catch any important assets you may have left out or acquired after your trust was created. By having this type of protection within your trust, you can better avoid putting any of your estate through probate, which can add time and expense. In addition, a residual clause can help protect your excluded assets from landing in the laps of people other than one of your trusted beneficiaries.

4. Funding Your Trust

To put your living trust into effect, you must make it the “owner” of your assets. Transferring your assets to the trust is called “funding.” Without this crucial step, your assets won’t be protected. This would, in turn, negate the trust’s main appeal of being quick, simple and inexpensive to carry out. In fact, any assets that are not funded to the trust could be subject to going through probate, which is what many try to avoid in the first place. In essence, if you don't fund the trust, you just have a really expensive doorstop.

5. Letting Your Trust Go Stale

Completing a living trust can feel like a big accomplishment, but don’t be tempted to check it off your list for good. As changes in your family occur, whether it’s a death, birth or marriage, you’ll want to be sure your trust is kept up to date with the right beneficiaries and asset distribution plan. Additionally, reviewing and updating it regularly can help you stay on top of the latest tax laws while ensuring your newly acquired assets are included. If you completed your estate documents while on active duty and you move to a different state after retirement updating your estate documents is very important. The most important thing to remember is that you want your living trust to always be an accurate reflection of your current state of affairs.

Preparing for the unexpected is easier said than done, but setting up a living trust can help protect your important assets later down the line. Just remember to keep these most common mistakes in mind as you prepare this important document. When done right, a living trust can be a great help and source of relief to loved ones after you’re gone.

1 https://www.caring.com/articles/wills-survey-2017/


If you liked this article, you might enjoy the following blog posts:

What Happens if a Military Officer Dies Without a Will


Inherit the Family Home? Tax Consequences for Military Officers


What Military Officers Need to Know about TSP and Estate Planning


This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.


Disclaimer
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.