Misconceptions about revocable living trusts abound, which is why it is so important to get professional help when setting one up. Here are three common mistakes people make when setting up a living trust.
Not Acclimating Trustees
After setting up your living trust and funding it properly, you need to make sure that the people you appointed to manage your property after your death are properly informed and equipped with the documents and information that they need. Help them get informed about the terms of the trust, the assets that are in it, and their future responsibilities.
Putting the Wrong Things In
There are some things that shouldn’t be put in a revocable living trust. For example, you usually should not transfer ownership of your IRA or 401(k) retirement accounts to the trust. This will be treated as a 100 percent withdrawal, which will affect your income taxes and may require you to pay an early withdrawal penalty. Instead of transferring ownership, you may want to name the trust as a beneficiary of your account, advice which also applies to Health Savings Accounts and Medical Savings Accounts. However, this is more complicated than can be explained here and will depend on a variety of factors, such as your marital status. That’s why it is so important to work with a qualified attorney when setting up your living trust. Transferring real estate to your trust when you still have a mortgage can also be complicated.
A living trust is there to avoid lengthy court sessions after your death. If, however, you make any contradictions by mistake, such as if you check the wrong box without knowing the legal meaning, you may end up not achieving your goal. Get an experienced attorney to help you out.
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