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Irrevocable Trusts Do's and Don'ts

Do's

  • Do make all transfers to your trust, as advised by the law firm, in a timely manner.
  • Do use trust assets for repairs, maintenance and improvements to real property in the trust.
  • Do use trust assets for payment of real estate taxes and homeowners insurance.
  • Do take dividends and income on trust assets on at least a quarterly basis.
  • Do call the law firm when you wish to make a gift from the trust to any of your beneficiaries.
  • Do call the law firm when a Grantor needs Medicaid benefits or dies.
  • Do call the law firm when personal or financial circumstances change significantly.
  • Do call the law firm if you wish to change trustees or break the trust.
  • Do provide your homeowner's insurance company with the “letter of instruction” and a copy of the trust for real property transferred to the trust.
  • Do provide your CPA or tax preparer with the “letter of instruction” regarding the trust tax return and the “letter of instruction” regarding tax deductibility of legal fees.
  • Do choose your trustee carefully to avoid the expense (and unpleasantness) of changing the trustee.
  • Do call the law firm if you want to refinance, take a reverse mortgage or equity loan on real property in the trust.
Don'ts
  • Don't use trust assets to pay telephone or utility bills.
  • Don't use trust assets to pay personal expenses.
  • Don't use trust assets to purchase an automobile.
  • Don't take principal or capital gains from trust assets.
  • Don't transfer IRA's or 401(k)'s to the trust.
  • Don't allow beneficiaries to return to the trust or the Grantor any gifts made from trust assets.
  • Don't make additional transfers to the trust in the future without advising the law firm.

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