Revocable living trusts can be an essential tool in estate planning. They allow individuals to protect and manage their assets during their lifetime and ensure that their loved ones are taken care of after they pass away. However, creating a revocable living trust is a complex process that requires careful consideration and planning. In this blog post, we will discuss some of the top mistakes to avoid when creating a revocable living trust in New York City, subject to the Estate, Powers, and Trusts Law (“EPTL”).
Mistake #1: Failing to Fund the Trust.
One of the most common mistakes people make when creating a revocable living trust is failing to fund it properly. Simply creating a trust document is not enough; assets must be transferred into the trust for it to be effective. This means changing ownership or titling assets in the name of the trust. Failure to do so can result in assets being subject to probate and defeat the purpose of the trust.
Mistake #2: Not Updating the Trust.
A revocable living trust is a living document that should be reviewed and updated regularly to ensure that it reflects changes in the individual’s circumstances and wishes. Failure to update the trust can result in unintended consequences, such as assets passing to unintended beneficiaries or being subject to unnecessary taxes.
Mistake #3: Not Naming a Successor Trustee.
A successor trustee is the person who will manage the trust after the individual’s death or incapacity. Failing to name a successor trustee or naming an unsuitable person can lead to confusion, delays, and potential legal disputes. It is essential to choose a successor trustee carefully and review the choice periodically.
Mistake #4: Not Considering Tax Implications.
A revocable living trust can be an effective way to reduce estate taxes, but failing to consider the tax implications can result in unintended tax consequences. It is crucial to work with an experienced estate planning attorney who can advise on the tax implications of a revocable living trust and help develop a plan that minimizes tax liability.
Mistake #5: Not Understanding the EPTL.
New York City residents who are subject to the EPTL should be familiar with its provisions and requirements. The EPTL sets out the rules for creating, managing, and terminating trusts in New York, and failure to comply with its requirements can result in unintended consequences. It is essential to work with an attorney who understands the EPTL and can advise on its implications for creating a revocable living trust.
In conclusion, creating a revocable living trust can be a valuable tool in estate planning, but it is essential to avoid common mistakes. Funding the trust, updating it regularly, naming a successor trustee, considering tax implications, and understanding the EPTL are all critical factors to consider. Working with an experienced estate planning attorney can help ensure that the trust is created properly and achieves its intended purpose. Feel free to contact Burrell Law via the form below when you’re considering your estate planning options.
- New York State Bar Association, “Estate Planning with Revocable Trusts in New York,” https://www.nysba.org/WorkArea/DownloadAsset.aspx?id=54654
- New York State Bar Association, “Creating a Trust,” https://www.nysba.org/WorkArea/DownloadAsset.aspx?id=56247
- New York State Unified Court System, “Estate, Powers and Trusts Law (EPTL),” https://www.nycourts.gov/courthelp/EPTL.shtml