Creating A Trust: 5 Mistakes Parents Make
Creating a trust for your children? There are many mistakes you can make when taking care of such important matters. No matter if you are a new parent or if your children are grown, you want to ensure there are measures in place to protect their inheritances. Creating a trust is the best way to go about this, but there are pitfalls. To help you navigate this landscape, our attorney discusses five of the most common mistakes that parents can make when going through this process.
Appointing the Wrong Trustee
A trustee’s responsibility is to protect and grow the trust assets along with administering it according to the terms of the trust agreement. You may already have someone in mind to act as the trustee for your trust, whether it be a family member or close friend. Because of the likelihood that this person has no experience with trust administration, you may want to considering appointing a professional trustee.
Not Allowing Enough Discretion
Planning your estate can feel like trying to foresee your kids’ future needs, and it can be quite tricky. When you’re setting up a trust fund for your children, appointing a Trustee is like choosing an experienced guide for their financial journey. This guide needs flexibility to navigate unforeseen circumstances, so your kids aren’t left high and dry when they need funds. Think of a professional Trustee as a skilled captain, able to make sound decisions in unfamiliar territory. They’ll use their wisdom to ensure your kids always have resources when needed.
Allowing Too Much Discretion
On the other hand, giving a Trustee too much power can also present a problem, especially if they’re not a professional. Imagine your children asking the Trustee for funds, but the Trustee isn’t sure that funds are really necessary. This could drum up some conflict between the parties — especially if the Trustee is a family member or friend. To keep the peace and assert some control, there should be rules in place within the trust. This gives the Trustee the power to say “no” to questionable requests and secure the assets for when they are truly necessary.
Failing To Stagger Trust Distributions
Trust funds can be safety nets for your children, especially when they’re too young to directly inherit from your estate. They can still be useful as your kids grow into young adults. Instead of dropping a huge sum of money into their laps, consider creating a timeline for the inheritances to be distributed. Doing so provides them with the opportunity to learn how to manage money. Distributing the funds in phases over several years can be a smart way to ensure they get the full benefit of the trust fund without getting swamped by sudden wealth.
Forgetting To Update The Trust
Establishing a trust fund when your kids are younger is a smart move, but it shouldn’t be a “set it and forget it” deal. As your children grow up and reach the age where they can inherit directly, updating the trust becomes crucial. Also, as the trust’s value grows over time, your original plan might need a revamp. Think of your trust like a growing tree—it needs to be pruned and cared for to remain healthy and productive. Revisiting your trust agreement every few years helps you make sure it still reflects your wishes and achieves your goals, adjusting to your family’s evolving needs and circumstances.
Our Team Can Help
For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about creating a trust for your children, contact our experienced Coral Gables estate planning attorney at Stivers Law by calling (305) 456-3255 to schedule an appointment.