Appropriate estate planning requires time and money. Unfortunately, people often try to save costs and cut corners by using “do-it-yourself,” boilerplate forms. The bad news is, one size does not fit all in estate planning. Many of these pre-made forms cause more problems than they solve. When legal estate planning documents are not properly drafted, the result may be an invalid will or trust, or something that does not actually achieve the results you expected. Even if the document is valid, it's probably a “bare bones living trust.”
Filling in the blanks is not enough
When you hear someone refer to a “bare bones” living trust, they usually mean a lean boilerplate document that most often lacks the necessary details and technical requirements that make the living trust most effective. For instance, many clients are looking to create a trust for the purpose of probate avoidance. Unless you accomplish the second step to establishing a trust, you cannot accomplish your goal of avoiding probate.
Your living trust must be fully funded
One of the pitfalls of using a bare bones living trust is that the owner does not address the necessary step of funding the trust. If a living trust is not fully funded, then it cannot provide probate avoidance. Funding a trust requires actually transferring the titled assets to the trust's name. There are basically three ways this is accomplished. Funding requires either changing the title of property to the trust, assigning ownership rights to the trust, or naming the trust as a beneficiary on certain accounts or other assets.
Bare bones trusts lack meaningful instructions
Pre-made legal forms are only designed to accomplish limited objectives. As such, they generally lack many of the important details that a properly drafted trust agreement would include. With a bare bones living trust, protections for your beneficiaries that could be included are most often lacking. Because a pre-made form is meant to be used by anyone, it is written as a one-size-fits-all document. However, no two clients have the exact same estate or the same family dynamic. The terms of the trust are supremely important.
Don’t miss out on the real benefits of a proper trust
There are a great many benefits to be gained from establishing a living trust. Some of these benefits include the ability to protect property for your beneficiaries, reduce or eliminate estate taxes, plan for your incapacity, and avoid probate. If, however, your trust only has the “bare bones,” you are definitely missing out.
If you have questions regarding living trusts, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.