Justin, My name is Mike, and I am a long-time resident of Hot Springs Village. Before retiring, I had my attorney in Jonesboro setup a Revocable Living Trust for me. I had to go through probate court when my father died, and I wanted to ensure my children avoided that. I think my legal affairs are in order, but I need a specialist’s opinion for peace of mind. What is the most common problem you see with old trust plans? Should I be worried? – Mike
Mike, thanks for writing. Many residents I meet in our community are life-long planners. They live within their budget, they carefully plan for retirement, and not surprisingly, many have a basic estate plan. In reviewing dozens of trusts over the years, the biggest problem I have seen is improper trust funding. Once you execute your trust, you have completed the first of two essential steps in establishing your estate plan. After executing the documents, you must fund the trust by retitling your assets into the name of your trust or listing your trust as the death beneficiary on your assets. Many lawyers do not emphasize this process, so clients get an incomplete plan.
Other times I review trust plans that are funded but hold assets that they shouldn’t. We advise clients to list individuals or a standalone, dedicated IRA Inheritance Trust as the beneficiary on their IRAs and qualified accounts, because listing a regular Revocable Living Trust can create massive negative tax consequences at the account owner’s death.