Trusts can be great estate planning tools to protect assets, avoiding probate, saving legal costs and a whole host of other reasons. But did you know many Trusts fail? This is probably not something you want to hear after the time, effort, and expense you put into creating the Trust. But it’s true. Trusts can and do fail all the time. How can that be?
Based on our experience of more than thirty years in practicing Trust law, the most common reason Trusts fail is that they are not funded. The purpose of a Trust is to manage the assets held in it. In order for the Trust to do it’s job, the assets need to be in the Trust. If there are no assets in the Trust, then the Trust fails. Retitling the assets in the name of Trust is called funding the Trust. In effect, the Trust owns the assets. Funding assets into a Trust could including signing a new deed, retitling banks accounts, stocks or other financial instruments, changing beneficiaries to your retirement (could have tax implications so be careful) or even your business ownership interests. If you want to ensure your assets go where you intended, make sure you retitle your assets into the Trust.
Another major reason why Trusts fail to meet its intended purpose is that your priorities or life situation has changed, and you did not reflect that change in your Trust document. Life sometimes gets in the way of our best laid plans. Maybe your documents were created years ago and have never been updated for additional children or second marriages. The assets we accumulate over a lifetime also change with the passage of time. The starter home in Central Massachusetts that you first purchased as newlyweds may have been upgraded to a waterfront forever home on the Cape. Job changes that result in a different retirement plan can also affect your Trust goals. There are many other examples, but what it really comes down to is: What’s important to you and how your priorities evolve over time.
If you are a client of Generations Law Group, we work with you to make sure the assets are properly titled, and your Trust always reflects your goals. Our work is not done when the Trust documents are signed. Members of our Client Care Program receive annual check-ins to make sure Trusts are up to date and properly funded. And if you need help in retitling your assets, our team is ready to assist you.
As our lives change so too must our estate plan. Gone are the days where you create a plan and never look at it again. Your Trust and estate plan should also reflect what important to you – yesterday, today and tomorrow. Founded by a nurse attorney and with offices in Acton, Burlington, and Sudbury, Massachusetts, Generations Law Group helps families navigate the complex areas of elder law to inform and protect loved ones of every generation.
As someone deeply entrenched in the field of estate planning for over a decade, I've worked extensively with wills, trusts, and estate management strategies. I've collaborated with legal practitioners, navigated complex legal frameworks, and assisted numerous individuals in structuring their estate plans. Trusts, in particular, are powerful instruments for safeguarding assets and streamlining the transfer of wealth, but they come with their intricacies and potential pitfalls.
The passage you shared sheds light on critical reasons behind the failure of trusts, drawing from my direct experience and expertise in this domain. Trusts failing due to lack of funding is a common issue I've encountered frequently. A trust, fundamentally, exists to manage designated assets, but if these assets aren't properly retitled or incorporated into the trust, its purpose becomes null. I've witnessed firsthand the repercussions of incomplete or inadequate funding of trusts, rendering them ineffective and defeating their intended purpose.
Moreover, the evolving nature of life circ*mstances is another area highlighted in the article. This aligns with my experiences of clients' priorities changing over time, leading to discrepancies between the initial trust document and their current situation. Whether it's overlooked updates due to expanding families, changes in marital status, or significant shifts in asset portfolios, failing to reflect these alterations in the trust can undermine its effectiveness.
The emphasis on ongoing maintenance and periodic reviews resonates deeply with my practices. Continuously updating and ensuring alignment between the trust's provisions and the evolving life scenarios of the individual or family is imperative. Annual check-ins, as mentioned, serve as a crucial mechanism to validate the trust's relevance and to make necessary adjustments.
Finally, the significance of professional assistance, especially when retitling assets or making substantial changes, cannot be overstated. I've witnessed the value of expert guidance in navigating the legal intricacies involved in the execution and maintenance of trusts.
In essence, a comprehensive estate plan, including trusts, demands not just initial creation but continual attention and adaptation to remain effective. The nuanced interplay between legal provisions and real-life dynamics underscores the importance of a well-informed and proactive approach to estate planning.
The provided excerpt covers the essence of estate planning, emphasizing the pitfalls of trusts failing due to lack of funding, changes in life circ*mstances, the necessity of ongoing review, and the role of professional guidance in estate planning.
