Creating a trust in your will can be a valuable tool for protecting your loved ones and ensuring your assets are used in accordance with your wishes. However, it’s crucial to avoid common mistakes that can undermine the effectiveness of the trust and potentially cause significant problems for your beneficiaries.
This article will discuss three common mistakes to avoid when creating trusts in wills.
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- Failing to Clearly Define the Trust’s Purpose and Objectives
One of the most critical aspects of creating a trust is clearly defining its purpose and objectives. Without a clear understanding of what the trust is intended to achieve, trustees will lack the necessary guidance in making decisions about how to manage and distribute the trust assets.
Common pitfalls include:
- Vague or ambiguous language: Using vague or ambiguous language to describe the trust’s purpose can lead to confusion and disputes among beneficiaries and trustees. For example, stating that the trust is for the “general welfare” of the beneficiaries may not provide sufficient guidance on how the trust assets should be used.
- Lack of consideration for future circumstances: The trust should be drafted with an eye to the future. Consider how the needs of the beneficiaries may change over time and ensure that the trust provisions are flexible enough to adapt to changing circumstances.
- Failing to address potential conflicts of interest: If the trustees have a potential conflict of interest, such as being a beneficiary themselves, the trust document should clearly address how these conflicts will be managed.
To avoid these pitfalls:
- Consult with a specialist wills and estates lawyer: A solicitor can help you clearly articulate your goals and objectives for the trust and draft the trust provisions accordingly.
- Be specific and detailed: Clearly define the purposes of the trust, the intended beneficiaries, and how the trust assets are to be used.
- Consider potential future scenarios: Think about how the needs of the beneficiaries may change over time and draft the trust provisions to accommodate these potential changes.
- Selecting Inappropriate Trustees
Selecting the right trustees is crucial to the successful administration of a trust. Trustees have significant responsibilities, including:
- Managing trust assets: This includes making investment decisions, collecting income, and paying expenses.
- Making decisions in the best interests of the beneficiaries: Trustees must act in the best interests of the beneficiaries at all times.
- Complying with legal and regulatory requirements: Trustees are subject to various legal and regulatory obligations.
Common pitfalls include:
- Selecting individuals who lack the necessary skills or experience: Choosing trustees who lack the necessary financial, administrative, or legal skills can increase the risk of mismanagement.
- Selecting individuals who may be unwilling or unable to serve: Circumstances can change, and individuals may become unwilling or unable to serve as trustees due to illness, incapacity, or other reasons.
- Failing to consider potential conflicts of interest: As mentioned earlier, it is essential to avoid appointing trustees who may have a conflict of interest.
To avoid these pitfalls:
- Carefully consider the qualifications and experience of potential trustees.
- Appoint co-trustees to provide a system of checks and balances.
- Consider appointing a professional trustee, such as a solicitor or a trust corporation.
- Include provisions for the appointment of successor trustees to ensure the continuity of trust administration.
- Failing to Keep the Trust Updated
Circumstances can change significantly over time, and it is important to ensure that the trust provisions remain relevant and effective.
Common pitfalls include:
- Failing to review the trust provisions periodically: Life events such as marriage, divorce, birth, and death can significantly impact the beneficiaries and their needs.
- Failing to update the trust after significant life events: If there are significant changes in your family circumstances or financial situation, you should review and update the trust provisions in your will accordingly.
- Failing to address changes in tax laws: Tax laws are subject to change, and it is important to ensure that the trust provisions remain compliant with current tax regulations.
To avoid these pitfalls:
- Review the trust provisions in your will periodically, preferably every few years.
- Consult with a specialist wills and estates lawyer to review and update the trust provisions after significant life events.
- Stay informed about changes in tax laws and their potential impact on the trust.
Blackstone Solicitors has a team of experienced lawyers who can provide expert guidance on all aspects of trust creation and administration.
We can help you avoid these common mistakes and ensure that your trust effectively meets your objectives.
How we can help
We have a proven track-record of helping clients create Trusts. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact Our Wills and Probate Solicitors
It is important for you to be well informed about the issues and possible implications of creating a Trust. However, expert legal support is crucial in terms of ensuring your wishes are met as you would want them to be.
To speak to our Wills and Probate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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