Last Workshop Wednesday we discussed considerations in choosing a Trustee. This is one of the biggest potential pitfalls for clients doing estate planning. Here are a couple more.
Choosing a Trustee
Funding the trust.
Putting together a plan that avoids probate and saves in taxes is just the first step. The next, really important step, is funding the trust. This is the act of placing assets under the name of the trust. Many clients just execute the documents, then never see their financial advisors to complete this step. It can be as simple as filling out the forms to change the name on an account. With the trust either not funded or funded incorrectly, the successor trustee and heirs would still be required to open a probate case in court to fund the trust through the probate process. This only occurs if the client also prepared a “pour over” will, which states assets should be transferred to the trust at death.
Executing the documents, then never looking at them again.
Just executing the documents is not enough. Situations change. People’s lives change. Minor children become adults, fiduciaries may get divorced or go through a bankruptcy. In our last workshop, we discussed taking other people’s lives into consideration when choosing a trustee. Most importantly, laws change, especially tax laws. Since 2001, the estate tax laws and exemptions have changed numerous times. For these reasons, reviewing your estate plan regularly is important. We would recommend sitting down with your attorney once a year to review your estate plan. This helps to keep the client current on any new changes in the law, and helps the attorney understand where the client is at that point in their lives and can recommend any beneficial changes or courses of action. At a minimum, when major life events occur, clients should be reviewing their plans.