The biggest issues with Living Trusts that blindside people have to do with the funding and maintenance they require. Info on funding a Living Trust is available here.
Not everyone realizes that a Living Trust requires maintenance if you still want to avoid probate. It’s not hard, it just sneaks up on most people.
You see, initial funding of a Trust titles or deeds property into trust, but the Living Trust allows you to take property out, put more in, or swap assets. This is where the problem arises.
It’s important for the individual(s) who hired the attorney to create their Trust to remember that every time they buy a new car, or move to a new house, that new asset needs to be titled or deeded into the Trust just like the original property did.
It’s that simple. Yet it is often forgotten. People get busy, and because a Living Trust isn’t a separate legal person like an LLC, corporation, or irrevocable trust are, and isn’t directly taxed (since it’s disregarded, and all income to Trust assets is taxed to the individual Grantor(s) (funders), people stop thinking about it.
Just remember that any time you buy real estate or any licensed vehicle you need to fund that into the Trust after the purchase. (Note that mortgage companies really don’t like to write loans on real estate held in a trust. They want to see an individual, natural person as the buyer they are lending to, so do what you did when you set up your Trust in the first place — Quit Claim it into trust after the purchase is completed. Also be aware that almost all mortgage-related debt notes include what’s called an “acceleration clause,” which means that if you breach any material provision of your debt contract, they have the right to “accelerate” the entire loan balance for immediate payment in full, so do your due diligence and act accordingly.)
Also be aware that when a spouse passes away, and real estate was held in Joint Tenancy instead of being put into the couple’s Living Trust (assuming they have one), the surviving spouse should absolutely put the property into the Trust ASAP to avoid passing away and making the real estate becoming a probate asset.