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Trusts can be the linchpin of a solid estate plan. But it’s important to remember that you can’t just set up a trust and forget about it. It’s a good idea to periodically review how your trusts are working, to make sure you and your family are getting the full benefit of them. Not doing so can be costly!
Here are just a few things to consider, and some common mistakes to avoid:
Is your trustee still the best person for the job?
If your trust arrangement allows you to change the trustee, you should periodically give some thought to whether the person you’ve selected is still the best choice.
Picking a trustee is difficult, because trustees typically wear two hats:
They must invest and manage the trust assets in order to maximize their value, and they must distribute them according to the terms of the trust and the wishes of the grantor.
The problem is that people who are good at investing and managing money are not always good at being sensitive to family needs, and vice-versa. That’s why some people who create trusts name two trustees – one who is in charge of investments (perhaps even a professional or trust company), and one who is in charge of distributions (such as a family member). This can sometimes be a good solution if no one person is ideally suited to do both jobs.
Does the trust actually own what it’s supposed to?
Sometimes people create an excellent trust plan, but forget to change the title to certain assets so that the trust actually owns or controls them.
If a trust is supposed to hold real estate, life insurance, shares of stock, retirement or bank accounts, family business units, etc., does it in fact do so? Changing the title to the assets can be complicated, but if it’s not done properly, the trust won’t work as intended. And if the assets have changed in any way over time, this needs to be reviewed as well.
In the second installment of this article, we will examine additional mistakes to avoid.