After you set up a Trust, look at asset transfers and beneficiary designations. Failure to do so can preclude maximizing benefits and causing extra costs and inconvenience.
Typical Trust Mistakes Include:
Asset Transfers: Creating a trust is just the beginning. Afterwards, you have to fund your Trust by transferring assets for maximum benefit. Assets not transferred into your Trust require being publicly probated after your death.
Beneficiary Designation: Don’t forget to change the beneficiary designations to your retirement accounts and life insurance policies. Failure to update the beneficiary designation could result in the asset bypassing the Trust, passing directly to the beneficiary, avoiding the Trust or going through probate if no beneficiary is designated. Or, the individual gets the money at 18, instead of later as was stated.
Current Tax Law: Outdated estate plans may use a funding clause that divides assets between a credit shelter trust and your surviving spouse. Since the Tax Cuts and Jobs Act doubled our estate tax exemption, Trusts using old formulas could have unintended results of disinheriting your spouse. The current Federal Estate Tax exemption is scheduled to expire in 2025. Unless Federal laws are changed, it will revert to $5 million.
Talk to your estate planning attorney regarding updating Trust and Estate planning documents.