When setting up a revocable trust, you need to be diligent about asset transfers, beneficiary designations and funding formulas. Failure to complete certain steps can prevent the trust from acting as you intended, creating additional cost and unintended consequences for your estate.Â
Common issues include the following:
Failure to transfer assets
Setting up a trust is just the first step. You must accurately transfer assets into the trust for its proper function to take effect. If assets are not transferred into a trust, they will still be subject to probate court on your death.
Failure to update the beneficiary designationÂ
A trust will commonly include accounts with beneficiary designations, such as retirement accounts and life insurance policies. Failing to transfer beneficiary designations to the trust could have unintended consequences; for example, someone might get more or less than you intended, or get access to funds sooner and with less control by you than you wanted.
Failure to adjust for current tax law
If you executed your trust documents a while ago, when the estate tax exemption was significantly lower, you need to review your plan to ensure you’re still getting the intended results.
