Everyone has the right to create a trust without a lawyer. But would people call it a right to treat themselves for medical problems without a doctor, or to build the airplane that they intend to fly in when they go on vacation?
A revocable trust is intended to be the owner or beneficiary of all or most of a person’s assets. If something is wrong with any estate planning document, everything a person has worked to build up over his or her lifetime could be placed in jeopardy.
When a person goes to a form book or a do-it-yourself website to create his or her own trust, he doesn’t know whether or not he has made or will make errors, or what the consequences of those mistakes will be. If a preliminary change of wonership form is not correctly filled out, for example, real property that has been transferred to the trust may be re-assessed for property tax purposes.
If a typed Will is incorrectly witnessed, it may be invalid. A trust form may be used which says that part of the trust becomes irrevocable when one spouse has died, even if that is not what the husband and wife intended. Alternatively, the form may say that the trust remains revocable when one spouse has died, even if the husband and wife intended the first-spouse-to-die’s portion to become irrevocable.
What if a trust form says that everything transferred into the trust is community property, but some of the assets were in fact one spouse’s separate property. How will this impact a later divorce?
Does the boilerplate document contain a no contest clause, and is that clause updated to reflect California’s recent law changes in this area? If real estate is to be given to a particular person, should it be given free of or subject to encumbrances, and should it be given free of or subject to estate taxes?
Is there a gift to a care custodian, and is a certificate of independent review needed to overcome the presumption of invalidity? Is there a durable power of attorney for health care, and does it comply with the federal privacy law called HIPPA?
Does the person considering creating his or her own trust understand the ramifications of filling out change of beneficiary forms for IRAs, retirement plans, annuities and life insurance? Should there be a financial power of attorney for IRAs and retirement plans, and whose form should be used?
If a boilerplate form contains generation skipping provisions where the children get the use of the assets but not the right to outright distribution, does the creator of the trust understand what this means? If gifts are made to various beneficiaries and if the beneficiaries die before the person creating the trust, should the gifts lapse ,ie not be made, or should the gifts pass to the children of the deceased beneficiary?
This article does not advocate that a trust be prepared by a particular attorney. Rather, it is intended to alert people to some of the dangers of creating an estate plan without an attorney.