Most individuals utilize a range of tools and strategies within their estate plan to effectively address all their estate planning objectives. A trust is among the most popular and versatile estate planning tools available; however, creating a trust agreement can be intricate, making it essential to collaborate with an experienced estate planning attorney to avoid common pitfalls. To help you understand those pitfalls, the Los Angeles attorneys at Schomer Estate & Wealth Advisors explain the top five mistakes people make when creating a trust.
What Is a Trust?
A trust is a legal arrangement wherein one party manages assets for the benefit of another. The person creating the trust, known as the Grantor (or Settlor, Maker, or Trustor), transfers ownership of assets to a Trustee. The Trustee then oversees those assets on behalf of the trust’s beneficiaries which may be people, organizations, charities, or even the family pet. Trusts fall into two primary categories: testamentary and living trusts. A testamentary trust is activated after the Grantor’s death, typically through instructions in a Last Will and Testament. In contrast, a living trust, also called an inter-vivos trust, becomes effective during the Grantor’s lifetime and may be either revocable or irrevocable.
Common Trust Creation Mistakes
While a trust can be an exceptionally beneficial addition to a well thought out estate plan, it is crucial to avoid making common mistakes during the creation of your trust agreement, such as:
- Selecting the Wrong Type of Trust: A trust agreement should be drafted to serve a specific purpose or set of purposes which makes choosing the correct type of trust vital to the success of the trust. For instance, if your goal is to protect assets from creditors or lawsuits, an irrevocable living trust is necessary because assets in other types of trusts may remain vulnerable. If your focus is on managing assets during incapacity, a revocable living trust is the more appropriate choice.
- Including Ambiguous or Contradictory Terms: The success of a trust relies on clear and consistent trust terms. A Trustee administers the trust based on these guidelines, and any vagueness or conflict can lead to mismanagement or require judicial intervention to clarify the terms. Such legal disputes can be costly and delay the administration process, emphasizing the need for precise language.
- Choosing an Inappropriate Trustee: Selecting a Trustee solely based on personal relationships, such as a spouse or close friend, without evaluating their qualifications can lead to problems during the administration of the trust. A Trustee must possess the financial acumen and legal knowledge necessary to manage the trust effectively. Careful consideration of the individual’s skills, reliability, and availability is essential.
- Failing to Clearly Define the Trust’s Purpose: A clearly articulated purpose is critical because the Trustee is legally obligated to administer the trust in alignment with its objectives. This clarity ensures that discretionary decisions are made appropriately and helps avoid confusion if the trust terms ever come under judicial review.
- Neglecting to Properly Fund the Trust: Without adequate initial funding, a trust cannot achieve its intended goals. While trusts often grow over time through investment, they must start with sufficient assets to meet their objectives. Overlooking this step can undermine the effectiveness of the trust.
By understanding these common mistakes, you can take proactive steps to ensure your trust serves its intended purpose effectively. Working with a skilled trust attorney will further safeguard against errors, providing peace of mind that your estate planning goals are met.
Do You Need Help to Avoid Making Mistakes during the Creation of a Trust Agreement?
For more information, please join us for an upcoming FREE seminar. If you are interested in incorporating a trust agreement into your comprehensive estate plan and would like assistance to avoid making common mistakes, contact the experienced Los Angeles trust attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule an appointment.
- How a No Contest Clause Can Help Your California Estate Avoid Probate Litigation - August 17, 2026
- Reasons to Incorporate a Living Trust into My California Estate Plan - August 16, 2026
- What You Need to Know about Funding a Trust in California - August 15, 2026
