When people establish trusts, they do so in order to meet certain estate goals. If the estate is not set up correctly, left unfunded or other mistakes are made, the trust may not fulfill the grantor's goals for which it was established in the first place. Although mistakes are commonly made, most can be corrected or avoided.
Some people fail to fund a trust after setting it up. A trust that is unfunded obviously does not serve its purpose. Another common mistake people make is failing to set up a trust or even write a will. People sometimes believe they can let the state divvy up their estate and assets. State intestacy law, however, may produce a result that is different from what the decedent had wished.
People who decided to save themselves some money by setting up their own trusts without help are more likely to make errors. They're also more likely to set up a generic trust that does not fit their specific purpose. Getting help from someone who is knowledgeable about the various types of trusts available is often a better idea for people.
There are many other mistakes commonly made by people when they are establishing trusts. As a trust can be a valuable tool to pass the assets to intended beneficiaries while saving probate costs, setting it up incorrectly can result in significant money and time losses. It is often a good idea for people to seek a consultation with an estate planning attorney when they are determining how to handle their assets and pass them to heirs. Often, an estate plan will include a combination of things, including a trust, will, life insurance policies and powers of attorney. Making certain the documents are legally sound and that updates are made when appropriate can be vital.
Source: CNBC, "Trust bust: Steer clear of the 8 biggest estate-planning mistakes", Barry Glassman, January 05, 2015