Creating a trust is a fantastic way to protect your assets, avoid probate, and streamline your estate plan. But even a well-intentioned trust can go sideways with a few common missteps. Let’s explore the top 10 trust mistakes.
1. Not funding the trust.
2. Picking the wrong trustee.
3. Not updating the trust.
4. Leaving out digital assets.
5. Overcomplicating the instructions.
6. Naming the wrong beneficiaries (or not updating beneficiaries).
7. Forgetting about taxes.
8. Choosing co-trustees who don’t get along.
9. Putting in assets that don’t belong in a trust (there’s a few).
10. Not telling people about the trust.
1. Not Funding the Trust
A trust without assets is like a safe without valuables—pretty pointless. One of the most common trust mistakes is forgetting to transfer assets into the trust. This includes real estate, financial accounts, and even sentimental items.
Example: Jane created a trust to avoid probate, but she never retitled her home in the trust’s name. When she passed, her home still went through probate. Oops.
2. Picking the Wrong Trustee
The trustee is your trust’s MVP. Choose someone who’s reliable, organized, and has a good head for details. Picking someone based solely on proximity or family ties can backfire.
Example: Mike named his brother as trustee because he lived nearby. Turns out, his brother hated paperwork and ignored deadlines. Cue the chaos.
3. Forgetting to Update the Trust
Life changes, and so should your trust. Marriage, divorce, new children, or a sudden windfall? Your trust should reflect those updates. Failing to update it regularly is one of the sneakiest trust mistakes.
Example: Sarah created her trust before her second child was born. She forgot to add the new baby. Years later, that oversight led to major family drama.
4. Leaving Out Digital Assets
Your trust should include access to online accounts, cryptocurrency, and digital subscriptions. Without these details, your trustee could face serious headaches.
Example: Paul had a substantial Bitcoin wallet. He never documented access credentials. His heirs couldn’t recover it—ouch.
5. Overcomplicating the Instructions
Complexity isn’t always a sign of sophistication. Vague or overly complicated terms can create confusion and conflict.
Example: Denise specified that her nephew could inherit her beach house only if he “maintained its coastal charm.” No one knew what that meant, and it led to legal wrangling over paint colors and patio furniture.
6. Naming the Wrong Beneficiaries
Don’t assume your trust overrides other documents. Your IRA or life insurance may still go to the ex you forgot to remove as a beneficiary.
Example: Adam updated his trust but forgot to update his 401(k). His ex-wife got a six-figure surprise. His current wife? Not amused.
7. Not Considering Taxes
Trusts can provide tax benefits—but only if they’re set up properly. Failing to account for state and federal taxes is one of the most common trust mistakes.
Example: Lisa created a trust to minimize estate taxes but didn’t consult the current thresholds. Her estate still got a hefty bill.
8. Choosing Co-Trustees Who Don’t Get Along
Two heads aren’t always better than one—especially if those heads constantly butt.
Example: Brian named his two kids as co-trustees. They disagreed on everything from investments to birthday card budgets. The trust turned into a battleground.
9. Assuming All Assets Belong in a Trust
Not every asset needs to go in a trust. Retirement accounts, for example, may be better off with designated beneficiaries.
Example: Maria retitled her IRA to her trust, triggering unintended tax consequences. A simple beneficiary form would have done the trick.
10. Keeping the Trust a Secret
A trust isn’t a mystery novel. Make sure your trustee knows it exists, where to find it, and how to use it. Silence can sabotage even the best-laid plans.
Example: Kevin created a trust but never told his trustee. When he passed, the document was buried in a desk drawer. It took months to locate it—meanwhile, bills piled up.
Trust the Process—But Avoid Trust Mistakes
A trust can be a powerful tool, but only when it’s created and managed wisely (e.g., see how a trust for Prince could have saved his family a lot of trouble). By avoiding these common trust mistakes, you can ensure your assets are protected, your wishes honored, and your loved ones spared unnecessary hassle.
Double-check your paperwork, keep it current, and maybe skip naming your bickering siblings as co-trustees.