Don’t Make These Mistakes When Creating Your Trust
Trusts have become a staple in every estate planning attorney’s arsenal. However, even the most meticulously drafted trusts can fall victim to common oversights, some of which can cause the trust to be invalid entirely. If you are wondering if your trust is valid, here is a list of some common pitfalls when creating a trust:Funding the Trust
In order for a trust to truly exist, the trust must have some kind of property held in its name. The most often way to fund a trust is to deed a piece of property to the Trust. Although this seems fairly easy, forgetting to fund a trust can have grave consequences. For example, Jane Doe creates a revocable trust to escape the probate process and give all of her possessions to her children. However, Jane never retitled her home to the name of the trust. Later, Jane passes away, and her estate is opened. Because the trust did not hold any property in the name of the trust, all Jane’s property will have to pass through the long and often tedious probate process. Jane Doe’s Revocable Trust is worth nothing more than the paper it’s written on.Properly Naming Trust Property
In this case, Jane Doe deeded her home to her Revocable Trust, of which the proper title is “The Jane Doe Revocable Trust.” She went to the Recorder’s Office, and recorded the deed. However, Jane mistakenly granted the property to “The Jane Doe Trust.” The mistaken name on the deed is fatal to Jane’s Revocable Trust if the deed is not corrected. For all intents and purposes, “The Jane Doe Revocable Trust” and “The Jane Doe Trust” are two entirely different trusts. Like forgetting to fund a trust, not properly titling property to the name of the Trust causes invalidation.Provisions for Minors
When planning for the unexpected, most individuals are attempting to protect their children and create a safety net for their future. However, most parents do not expect to pass away before their children reach the age of majority, eighteen years old. We all know life is unexpected, and some trusts do not plan for that unfortunate circumstance. Under the laws of Illinois, minor children cannot hold any property in their name. Minor children’s property must be held in their name by a custodian, much like a trustee holds title to the property of a trust. Trusts lacking a provision for the creation of a custodial account in the minor’s name can create an enormous amount of unneeded frustration for a child who has lost their parents. Without a custodial provision, the child must go through the legal process in which a custodian is appointed to him. No child should be subject to the court process if it can be avoided. This can be accomplished by including a provision that not only creates a custodial account for minor children, but also name the custodian you wish to hold their property.Power to Access Digital Accounts
In today’s age of technology, digital accounts, whether for social media or financial institutions, are a staple in everyday life. Unfortunately, the common practice of using boilerplate trust language has not been updated to include provisions granted access to any of these accounts. In fact, most trust drafted prior to 2010 do not contain any mention of the word “digital.” Access to such accounts is invaluable to trustees, and cannot be accessed unless specifically given the power to access such accounts within the trust documents themselves. Although not necessarily fatal, granting a trustee the power to access digital accounts will prevent the trustee from having to request access to the accounts. It is much easier to show an online financial institution a copy of trust documents than for the trustee to ask the court for help to access the accounts.The “Pour-Over” Clause
The trust documents not only control who the beneficiaries of the trust are, but what kind of property can be placed into it. Most trusts used for estate planning only have a small amount of property while the Grantor is alive. When the Grantor passes, the intent is to have all the property still held in the Grantor’s name be transferred into the name of the Grantor’s trust. For this “roll-over” to happen, there must be two things. First, the Grantor’s will must contain a provision saying all of the Grantor’s property should be placed in the Grantor’s trust. These types of wills are fairly common, but must properly name the trust to be valid. Second, the trust itself must contain a broad general provision allowing the property to be placed in the trust on the grantor’s death. Although usually common, the lack of this type of provision can cause all property not placed in the trust to be subject to probate.
The firm of Bellas & Wachowski Attorneys at Law can help you make the necessary estate planning decisions in a cost-effective manner. Contact Attorney Tracy Ries at email@example.com 847.823.9030 x221 for more information.