Wills and Estate Planning

Creating a Living Trust: What Not to Do

A living trust is something many people choose to create for themselves. But beware of potential missteps. There are specific things required to make a living trust actually work for you.

Living Trust Steps to Avoid

Unlike a valid will, a legally binding living trust can help your loved ones avoid probate court, and allow your assets to be transferred to your beneficiaries in a matter of weeks. (The probate court process could take several months or even years, in the event that the will is contested.) A living trust also affords your family and loved ones a higher degree of privacy, because unlike a will, a living trust is not a matter of public record.

All assets placed in a living trust can be used for your benefit until the time of your death, until they are transferred to the named beneficiaries. A living trust can also be a way for larger estates to pay less in estate taxes. Once your trust is created, you can name the trust itself as your beneficiary on your life insurance policies, 401k, and other retirement plans. However, if you opt to create a living trust yourself instead of relying on an estate planning attorney to do so, there are several common missteps that you should make an effort to avoid.

Don't forget to include the names of the grantors, trustees, and beneficiaries.

It sounds simple enough, but if you are working with a basic boilerplate legal form that you've downloaded from a legal website, there are a few very important names you'll need to fill in, and failure to do so could make your living trust unenforceable. Ensure that the names of the grantor (you), the trustee (the person who oversees the trust and distribution of its assets), and the beneficiaries (the person or persons who receive the assets) are all clearly named on any legal form or self-written living trust. It's also wise to name a successor trustee, just in case your chosen trustee predeceases you.

Don't forget to “fund” the trust.

Be aware that separate paperwork is required to actually transfer your bank accounts, stocks, or other assets to the trust itself. If the living trust is never funded, there are no actual assets to pass on to your beneficiaries.

Don't use “precatory” language.

Precatory language is a legal term that essentially means language that expresses wishes or desires, but does not create legal obligation. All the niceties one would use when writing a more personal document such as a letter or a greeting card should absolutely be avoided when writing a living trust. If you want to leave your beneficiaries money or assets to be used in a specific way, avoid language like “I would like you to...” or “I hope you will...”. Legal documents require concise language and specific terms in order to fully enforce your final wishes. It's best to leave instructions, not suggestions.

Don't neglect to hire a notary public.

A living trust that isn't notarized will do little to help your estate and your beneficiaries avoid probate court. You may be able to skip on the expense of hiring an estate planning lawyer to help you draw up this document, but you cannot opt out of hiring a notary public to notarize your document and make it legally enforceable.

If you'd like more information about living trusts, creating a will, or other aspects of estate planning, be sure to consult the Protective Learning Center.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

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Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

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Creating a Living Trust

A living trust can be a vital document when it comes to estate planning. If you're looking to create a living trust document on your own, try not to make these common errors. For more information, visit our learning center.

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