You've Been Warned: Leaving A Trust Empty Is More Risky Than You Thought

Setting up a trust can be a smart way to protect and manage your assets, but it's important to know the difference between a will and a trust so you know how best to handle your estate planning. A trust can be more complex than a will, but it has the added benefit of allowing your beneficiaries to avoid probate. However, while you aren't required to fund a trust immediately after it's established, failing to transfer, or retitle, any assets into your trust can have consequences. According to Kimberly Frank, director of tax, trust, and estate with the Wealth Strategies Group at Schwab, "Any assets that aren't appropriately retitled may have to go through probate, which can be a very lengthy process." This means that failing to fund a trust can defeat a major purpose of having made one in the first place.

To ensure that your assets are managed and distributed through a trust per your wishes, you'll have to retitle them, making the trust the owner of said assets rather than an individual. It's worth noting that you can change a revocable living trust as you see fit during your lifetime, however, after your death no one can make changes to it. This means the assets in your trust will be designated to beneficiaries per your instructions. If there are no assets in the trust, then your estate will most likely be forced into probate, which puts someone else in control of how your assets and wealth are distributed to your loved ones or charitable organizations.

Different types of trusts exist to protect your assets in different ways. So, familiarizing yourself with the options can ensure you're well-equipped to select what best meets your needs. There are certain assets you should never place in a living trust, such as 401(k) accounts, and many experts say you should also avoid putting financial accounts you're actively using in a trust. With that said, a trust can be perfect for protecting assets like real estate, investment accounts, life insurance, and business interests. Plus, personal property like valuable antiques or collectibles, along with everyday items like appliances and furniture, can be dispersed according to your wishes if placed in a trust before you die.

Certain kinds of properly require you to retitle the asset into your trust, which simplifies the process of eventually transferring deeds to your beneficiaries. If you own a business or have a stake in a corporation, for example, placing the rights to those assets in a trust can make for a smooth transition, whereas attempting to distribute these types of assets in a will can lead to a long, drawn-out probate period that can cause problems for business operations. Similarly, putting your investment accounts into a trust can allow the trustee you put in charge to manage those accounts in the event you're unable to do so yourself.

According to SmartAsset, the cost to create a trust can range anywhere from a few hundred dollars to $4,000 or more. This large discrepancy is due to whether you use basic online services to set up a trust on your own or working with an attorney. Depending on the complexity of your trust, and the assets you want to place in it, working with an attorney can prevent any potential mistakes that might cost you in the long run. Other factors that affect how much it costs to set up a trust include your location, whether you're married or single, and the type of trust you want for your assets.

In addition to the cost of creating your trust, you'll probably have to pay fees to transfer or retitle your assets. If you hire a professional to oversee your trust, you'll likely pay ongoing fees that can last for years or even until your death. Making revisions to your trust, such as adding or removing assets or changing beneficiaries, will also incur fees. However, by going through the work of placing your assets into a trust, you can ensure your beneficiaries will have clear guidelines for allocating your estate according to your desires.