Many people in New Jersey wishing to avoid probate may have taken the step of executing a revocable trust. Doing so means that the assets in the trust will not go through the lengthy and expensive probate process. Moreover, trusts are not made public, which may also make them attractive to many. However, it is important to avoid these estate planning mistakes that could render one’s trust ineffective.
First, after the trust is executed, it is important to actually fund it. Assets in the trust must be titled in the trust’s name, or else they will not be included in the trust. One option to consider is a “pour over” will that, when the grantor dies, will transfer any remaining property into the revocable trust. This way, they will be distributed per the grantor’s wishes without having to go through probate.
Second, keep in mind that trusts should be reviewed periodically, to account for the fact that one’s life is constantly changing. A person may sell or lose assets, gain assets, have children or grandchildren, get married, get divorced or experience many other life events that may make it necessary to modify the terms of one’s trust. Regular reviews of one’s trust can ensure the trust accomplishes what the grantor wants it to.
Also, it is important to know that certain assets cannot be placed in a trust. For example, life insurance policies and retirement accounts cannot be placed in a trust, as they are governed by the beneficiary form that was executed when you obtained the asset. Instead, those assets will go to the named beneficiary when the account holder passes away.
These are only a few points to keep in mind when it comes to trusts and estate planning. Without being funded, there is nothing for the trust to distribute. If a person’s wishes change as their life changes, a trust should reflect this. Finally, it is important to understand that not every asset will be subject to the terms of the trust. Those who have questions about how to manage a revocable trust once it is executed will want to seek professional guidance, to ensure their trust remains effective and continues to meet their wishes.