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Helping You Navigate Complex Legal Issues

Trusts and their common pitfalls

Gregory A. Lang

Minnesota residents who wish to administer their estate through a trust should be aware of some common issues with trust setup and execution. A trust can be a useful tool for carrying out complex bequests, seeing to the long-term care of disabled and troubled relatives, protecting the family from the publicity associated with probate and shielding a larger proportion of the estate from excess tax exposure. However, the trust must be created and administered properly, or it may be largely ineffective.

The choice of trustee can be critical. The trustee will have the responsibility of executing the trust and seeing to the interpretation of the last wishes of the benefactor. This has the potential to place people in uncomfortable situations. For example, if one family member is a trustee, he or she may feel unduly pressured, and the other family members may feel unfairly excluded.

It is also necessary to observe details such as funding the trust. Any accounts that are meant to be used for that purpose must be signed over to the trust's ownership. Some people also incorporate provisions into their will that turn over all their extra assets to the trust at the time of their death.

The trust should be reviewed every few years to make sure that it is reflective of the current desires of the benefactor. As family members grow older, custodial arrangements evolve and people prove themselves either more or less trustworthy, it may be necessary to revise the provisions of the trust and make sure that all bequests are still directed at the proper people.

The regular maintenance and updating that a revocable trust requires may benefit from the oversight of an attorney. They may be able to help the trustee and benefactor remain within full compliance of the law while expressing the wishes of the benefactor very precisely.

Source: CNBC, "Trust bust: Steer clear of the 8 biggest estate-planning mistakes", Barry Glassman, Oct. 22, 2014

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