Common Mistakes When Setting Up a Living Trust in Virginia
A revocable living trust is an excellent estate planning tool. How well your revocable living trust works will depend on what your estate consists of, how complex it is, and what you are trying to accomplish.
If you are thinking of setting up a living trust in Virginia for estate planning purposes, here are the most common mistakes you cannot afford to let happen:
1. Assuming That a Revocable Living Trust Will Protect You From Long-Term Care Medicaid Recovery
A living trust will not protect your assets from long-term care Medicaid recovery. In Virginia, Medicaid has a right to recover any long-term benefits they paid on your behalf for a nursing home. In some cases, Medicaid can even put a lien on your house and on your probate estate after you die.
2. Assuming That Your Revocable Living Trust Will Protect You From Creditors and Lawsuits
A revocable living trust will not protect you from creditors and lawsuits. Asset protection requires an irrevocable living trust. What’s more, the trust cannot be in your individual name.
3. Having Beneficiary Designations That Conflict With Your Trust
If you have beneficiary designations on your life insurance or your IRA, for example, that conflict with the instructions in your trust, the beneficiary designations will prevail, regardless of whatever your trust says.
4. Failing To Update Your Trust
A trust is not a one-and-done situation. Your life changes—new people come into your life over time, people are born, people die, and people get divorced. As those changes happen in your life, your living trust must be updated to reflect those changes.
5. Failing To Fund Your Trust
The biggest mistake people make when setting up a living trust is failing to fund the trust. This means that they fail to retitle their bank accounts, real estate, and other property from their individual name to the trust they own.
If the trust is not funded, there is nothing in the trust. If there is nothing in the trust, the trust does not have anything to operate or act upon. But, for your living trust to work correctly, it must be funded with your assets.
Because it is typically your biggest asset, real estate is one of the most important assets that should be transferred to your living trust to avoid probate later. It would be best if you also transfer ownership of any stocks, bonds, or mutual funds into your living trust, along with any other major assets you own.
A trust is useless unless you fund it with your assets. Anything you own in your individual name, and that you do not put into the trust or provide for with other estate planning mechanisms, will have to go through probate.
Consult With An Experienced Virginia Estate Planning Attorney
By following these guidelines, you can avoid making mistakes you cannot afford when setting up a living trust. If you have questions about setting up a living trust in Virginia (i.e. what you need to do, how to fund the trust, or how to administer the trust), call us today at (703) 553-2577 or use the contact form to talk to an experienced Virginia estate planning attorney and get your questions answered.
The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.