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3 Things You Shouldn’t Forget When Creating a Trust

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If you are creating a trust, you already know that you need to get the initial paperwork right. You don’t want your trust to end up not being enforceable or not serving the designated purpose, especially since you might not find out about the problems until it has become too late to fix them.

1. Designate a successor trustee

If you create a living trust, you will most likely want to retain control over your assets. As a result, you will probably initially be the trustee of your own living trust that you create. However, you should also name a successor trustee. That is the person who will be in charge of taking over the management of trust assets if something happens to you.

One of the major benefits of making a living trust is that this document can help you be prepared in case of incapacity. The assets held in trust that you are managing can be managed by the successor trustee if something happens to you and you become unable to control your own property. Your loved ones are not going to need to court to have a guardian named to manage your assets, and you won’t have to worry about someone taking over the management of your property.

If you don’t name a successor trustee, then you will lose this huge advantage. You’ll want to select someone who you trust completely to fulfill this role as they will be responsible for caring for and managing your property in case of your incapacity. They will also help to facilitate the transfer of assets upon your passing through the trust administration process.

The trustee has a fiduciary duty—the highest duty owed—to act in the best interests of the trust beneficiaries. However, it’s important to be thoughtful about who you select as your successor trustee. Choosing wisely ensures that you and your loved ones have peace of mind, knowing that the assets you’ve worked so hard for will be managed effectively if something happens to you.

You should also talk with the person who you are naming as the trustee before you go ahead and include their information in your trust creation as successor trustee.

trust heirs

2. Fund your trust

Creating the trust is just the first step. You need to fund it if you want it to serve its purpose. Funding the trust means transferring ownership of assets to it. You could make the trust the owner of many different kinds of assets, depending on your situation.

You’ll need to go through the process of changing the legal owner of record for property you are transferring into the trust. For example, if you own a car or a house but you would prefer the trust owns it, you’ll need to go through the formal process and submit the paperwork required to transfer the vehicle or home’s official ownership to the trust.

There are some situations where problems could arise if you try to transfer the title, such as if you have a home with a mortgage on it and the house acts as collateral and secures the loan. You should consider working with an estate planning lawyer to help you to better understand your rights and obligations and to work with you to make a living trust that doesn’t violate the rules.

3. Keep beneficiaries updated

Finally, you should not forget to make adjustments to your beneficiaries as needed. The beneficiaries are the people who you designated to benefit from the trust.

While you are alive, you could be the sole beneficiary of the trust if you choose. You could also opt to designate co-beneficiaries who would also benefit from trust assets. For example, you and your spouse might be co-beneficiaries of the trust that you have created together with the goal of protecting your marital assets.

You’ll also want to name residuary beneficiaries who will benefit from the trust after you pass on. This could be children or other close family members or loved ones. You should name these residuary beneficiaries when you initially create your trust in order to ensure that the trust serves the goal of helping to ensure that your assets transfer outside of the probate process. You want to be sure that it’s clear who should get the money and property when you are gone.

Over time, you may find it necessary to change your beneficiaries due to life changes, such as people entering or leaving your life. For instance, if you part ways with a friend who was a beneficiary, you would want to update your trust. Similarly, you may need to make adjustments if a beneficiary passes away or if you welcome a new family member, such as a grandchild, whom you wish to include in your trust.

By keeping your beneficiary designation up-to-date, you can make certain that your trust will always provide for the people you love. The McGee Law Firm can help. Give us a call at 817-899-3286 today schedule your free personal consultation.

Brandon McGee
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