5 Reasons to Avoid a DIY Trust

 Posted on September 30, 2024 in Estate Planning

A trust is an excellent legal tool that can help safeguard your assets, your health, your family, your privacy, and more. It is an entity that can assume ownership of your property to protect it from creditors, taxes, publicity, and other threats. 

Trusts involve three people:

• The grantor sets up the trust.

• The trustee manages the trust and its assets.

• The beneficiary receives the assets or benefits from the trust.

Trusts are best created by an experienced Connecticut estate planning attorney. In today’s do-it-yourself era, however, some estate planners attempt to create their own trusts through AI or software programs. This contains several pitfalls that can spoil the effectiveness of a trust. Here are five reasons to avoid setting up a trust on your own.

Choosing the Wrong Trust

One of the reasons trusts are complex is because there are several of them and each one serves a different purpose. A special needs trust, for example, holds assets for a beneficiary who is disabled and who may need supplementary financial support. A testamentary trust protects your assets and comes into effect when you die.

Some trusts overlap but still have significant differences. Choosing the wrong trust can leave you, your family, or your assets with fewer protections.

Failing to Fund the Trust

Even once a trust document is created, you still need to fund the entity. This means transferring whatever asset you want into the trust, which can require a significant amount of paperwork. There may also be other tasks that require making changes to documents. In a land trust, for example, you need to transfer property to the trust and you may also want to change the name on the property title. Such tasks are best done guided by a professional.

Failing to Account for State Trust Laws

Another common pitfall of DIY trusts is that they fail to take into account state-specific trust laws. Each state has different laws and regulations concerning trusts. Using a generic trust template that does not consider Connecticut law can make the trust ineffective.

Appointing the Wrong Trustee

Even if you had a solid trust, naming the wrong trustee can endanger whatever the trust is supposed to protect. The trustee’s job is to manage the trust and its assets — in some cases after you have passed away. Appointing a trustee who does not understand how to manage the trust or naming one who might misuse the assets is a hazard that can be avoided with proper guidance.

Using Generic Templates

DIY trusts often work by supplying you with generic templates for you to plug in certain information. However, this does not take into account that the terms of the trust should be specifically tailored to your needs and circumstances. Someone who is a single parent of two, for example, should not have the same terms as someone who has six children in a blended family and owns three businesses.

Contact a New York Metro Area, NY Estate Planning Lawyer

Trusts are complex and can be ineffective if left to a computer program. Make sure they are drafted by a Greenwich, CT estate planning attorney who has experience in trust law. At Ivey, Barnum & O'Mara, LLC, we are ready to discuss your estate planning needs and create a trust perfectly fit for your purposes. Speak with an excellent attorney by calling 203-661-6000 today.