Don’t Let Your Well Planned Out Trust Fail

So you’ve done the right thing, and gone to an estate planning attorney and set up your estate plan. Your estate plan is complete, and you can go on, safe in the assumption that your property will be left to whomever you have designated to get it.

Except for one problem: have you taken into account that your trust could fail?

Trusts Can and Do Fail

Yes, despite the fact that you procedurally and legally may have set up the trust the right way, with all the legal formalities, it does happen that trusts fail. Worse, they often fail after we are gone, leaving beneficiaries, trustees, and others, to fight out the consequences of these failures, in probate court.

The good news is that with careful estate planning, you can take measures to try to minimize the risk of this happening.

Not Transferring Assets

One common way that trusts fail, is they dictate what they want to happen in the trust, but they don’t take steps to make these things happen—specifically, they often don’t actually transfer the assets that are supposed to be in the trust, into it. So, the trust says property in a trust is to be left to someone, but the property can’t be left to that someone, because the trust doesn’t legally own the property.

The solution here is easy: Inventory what you have put into trusts, and make sure that you have actually, legally retitled property, or transferred property, into that trust.

The Property is Gone

It does happen that the property that is in the trust doesn’t exist by the time the trust is to be executed or property disbursed. So, for example, a home in a trust that is supposed to go to someone, which has long been sold.

While the absence of an asset won’t always cause the entire trust to fail, it can lead to significant litigation, and a court could dissolve the trust or alter its terms.

No Beneficiaries

Sometimes, the property is in the trust, but the people who are supposed to get that property, are not.

Sometimes beneficiaries pass away before the trust takes effect or before distribution, and no secondary or backup beneficiaries are named.

Other times, beneficiaries may be improperly named—for example, leaving property to “my brother,” when you have multiple brothers.

And other times, people may move away, disappear, or lose contact with relatives, and they cannot be found (although this is a bit easier nowadays, with social media allowing people to be tracked).

Life Changes and Remarriage

Life changes can cause trusts to fail if the trust isn’t updated. This often happens when people remarry. If property is left to “My Wife, Sarah,” but by the time the testator (creator of the trust) passes away, his wife is no longer Sarah because of death or divorce, that property has nowhere to go—there is no wife named Sarah anymore.

Do your estate planning the correct way. Call the West Palm Beach estate planning lawyers at The Law Offices of Larry E. Bray today for help with your will or trust.

Sources:

academic.oup.com/book/10848/chapter/159037269

jdsupra.com/legalnews/if-terms-of-a-terminated-trust-fail-to-s-65559/