Trusts can be used as an asset protection tool and to help your beneficiaries avoid the cost and expense of probate. Trusts transfer legal ownership of assets to a trustee. The property is deeded in the name of the trust and the trustee is tasked with administering it as the grantor specifies. There may be more strings attached to an asset in a trust than if it were simply left to someone in a will.
While a trust is a fairly straightforward instrument, simple mistakes can interfere with and invalidate what would otherwise be a straightforward transfer of property. Let's take a look at the common mistakes people can make when creating a trust.
Overall, you may perceive an even more basic problem: the cost necessary to establish a trust and to create a pour-over will that deposits any remaining assets into the trust at the end of the testator's lifetime. Administering the trust also may add expense—the trustee may have to retitle documents or add new filings to transfer ownership to the trust. But these expenses should be compared to the costs of probate and paying fees to the estate executor that often equal a significant share of the probate estate.
Another possible problem involves interpersonal issues that may arise between the beneficiaries and the trustee if the beneficiaries resent the trustee's role or believe that he or she is not acting in their best interests.
It's key to remember, however, that you can overcome any of these problems by setting up a trust with forethought and professional assistance.
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