Bank of America Exposes Hidden Flaws in Your Trust

Why It Matters

Improperly drafted trusts expose families to costly litigation, unintended disinheritance, and tax inefficiencies, threatening the very purpose of estate planning.

Key Takeaways

• Ambiguous terms like “children” can exclude stepchildren or IVF offspring
• Undefined asset instructions often trigger forced sales and family disputes
• Rigid payout schedules may expose beneficiaries to creditors and inflation
• Letter of wishes adds context, guiding trustees without legal force
• Succession plan for trustees prevents fiduciary gaps and asset vulnerability

Pulse Analysis

Trust ownership in the United States climbed from 11 % to 14 % between 2025 and 2026, according to the Trust & Will 2026 report. The surge reflects higher disposable wealth and the recent increase in the federal estate‑gift tax exemption to $15 million per individual (or $30 million for couples). While more families are turning to revocable and irrevocable trusts to shield assets from probate and taxes, the rapid adoption has exposed a wave of drafting errors that can undermine those very benefits.

Bank of America’s Private Bank identified five recurring flaws. A single ambiguous term—such as “children” or “descendants”—can unintentionally disinherit step‑children, adopted children or offspring conceived through assisted reproduction, because state statutes define those words differently. Failure to specify how illiquid assets like a vacation home or family‑business shares are to be handled often leads to forced sales and costly disputes. Overly rigid distribution schedules ignore inflation and life‑event volatility, risking creditor claims or divorce‑related losses. Adding a non‑binding letter of wishes supplies the personal rationale that courts and trustees otherwise lack.

The bank recommends a five‑step review: verify every defined term, detail instructions for each non‑cash asset, draft a letter of wishes, embed a clear trustee succession mechanism, and include incapacity provisions that align with powers of attorney and living wills. By building flexibility—such as discretionary payout language and equalization provisions—trusts can adapt to future financial climates while preserving the grantor’s intent. Estate‑planning professionals who incorporate these safeguards help clients avoid litigation, protect multigenerational wealth, and capitalize on the expanded tax exemption.