Revocable trusts have been established as very good alternatives to will documents, particularly for individuals who want to avoid the probate process. These estate plans are private family entities, which means that every asset that is put into the trust is governed by a private agreement and removed from the court system.
Upon first death, the assets in the trust will automatically be transferred to the trust beneficiaries without the need for court intervention. This is the prime benefit of having a revocable trust as it ensures a seamless, quick, and automatic transfer of assets.
However, in order to reap the benefits of revocable trusts, it needs to be set up properly. There should be adult beneficiaries designated and assets must be put into the trust proactively. Many people make crucial mistakes that ruin the purpose of their revocable trust and result in having to go through probate to correct the wrong.
The Number One Mistake You Should Avoid in Your Revocable Trust
The area where a lot of confusion lies when it comes to revocable trusts is putting real estate into the family entity. For a real estate property to be included in the trust, there must be a real estate deed naming the trust as the owner.
A lot of people do undertake this step, however, they tend to neglect putting new real estate properties into the trust down the line.
For example, an individual may have a house under the trust. Several years later, they decide to downsize and buy a smaller home or a condominium unit. For this piece of property to be part of the trust, another real estate deed needs to be accomplished. It’s a proactive step to ensure that new properties are put into the family entity.
Without a new deed, new properties will need to go through probate to be distributed because they did not make it into the revocable trust. This defeats the purpose of the estate plan. Hence, it’s important to ensure that new real estate properties have deeds that end up in the family entity.