In this video, we are going to discuss the dangers of do-it-yourself living trusts.
Obviously you can do almost anything on the internet these days and trusts are one of them, but should you? And what are the risks?
I’m Sarah Siedentopf, I’m an estate planning and probate attorney in Atlanta, Georgia, and also the author of “Peace of Mind Through Estate Planning.” What are the actual risks? And the first thing to understand is, what could go wrong in a trust generally. And I think there are two basic categories.
The first one being that we didn’t create the trust correctly, it wasn’t signed correctly or things weren’t transferred into it correctly. For whatever reason, it is not a complete active trust. So in that situation, it’s just like you never created the trust, except possibly worse. If you got something half transferred into a trust that doesn’t exist, that could be more difficult to unwind. But in general, it’s just going to be like, you didn’t do a trust at all. So you’re not achieving whatever your goals were for the trust. And undoubtedly you do in fact, have a reason and a purpose for putting something into a trust. So that’s option one. We think we have a trust, and we just don’t.
Option two is that you do put the trust in place completely, it’s just that the provisions of the trust don’t do what you want them to do. Whether that’s not accomplishing something from an IRS perspective or whether that’s incorrect provisions for the trustees, so that money isn’t coming out or going to the right places at the right time, whatever it is, the trust is not actually structured to achieve your goals. So those are the two possibilities.We might not have completed a trust, or we might have a wrong trust, as it were. And either of those is going to cost money. We’re going to have attorney’s fees and probate fees. This is going to cost real dollars to fix. Another issue around that is going to be that usually we don’t find out about the problems until it’s too late to fix them. Somebody passes away, we can no longer amend the trust or put their assets into a trust. And so often you don’t find out that there is an issue until too late.
Those are the dangers, and here are some reasons that you should consider not doing that.
The first one being, you’re not receiving advice. So you’re not receiving advice on making sure that it’s set up correctly, that you’ve got the provisions that match your goals, that match your circumstances. In general, these trusts are the names of the people in charge, who gets what, and when, basically. So it’s going to be gifting provisions or monitor use provisions. But the rest of everything in that trust is generally not something that they let you choose. So you are not getting anything customized to your situation. You’re not getting something customized to your family and your goals. You’re getting their boilerplate provisions that they have decided are the most inclusive to work for everyone. This is probably not going to be the best, best-case scenario for you.
Another thing to look out for is, of course, you’re going to customize it with special instructions to the trustee. And what you’re going to get is a blank space for you to type in special instructions to the trustee, which is great, except you might have a little writer’s block, but when you put your words onto the paper, you need to be sure that they are covering all the options, and they make sense to someone other than yourself, they are legally binding. If circumstances change, perhaps we say, you know if X happens, do Y. We require knowing, “What if X doesn’t happen?” “What if W happens?” “What happens then? Is that covered? Are all the options provided for?”
So when you’re doing do-it-yourself online, you don’t know if that’s true, if that is the case. And of course, back to the idea that we don’t find it until it’s too late. In my practice, I have dealt with do-it-yourself trusts, do-it-yourself wills, do-it-yourself LLCs, all of these things after someone has passed away. And generally speaking, it is much more complicated to unravel than a trust that was put together by a competent attorney who gave good advice and helped the client put the correct things into the trust in the correct way. So it can cost time, money, headache, and just general stress for family members after you pass away, if this was done incorrectly.
Thank you for taking the time to listen, and please follow me for more information.
