diff --git a/config.go b/config.go
index 55f03509d..ab01e897c 100644
--- a/config.go
+++ b/config.go
@@ -400,19 +400,6 @@ func loadAndValidateConfig(interceptor signal.Interceptor) (*Config, error) {
 		cfg.Lnd.RPCMiddleware.Enable = true
 	}
 
-	// For the integration of tapd with lnd, we need to allow tapd to send
-	// custom error messages to peers through the SendCustomMessage RPC in
-	// lnd. Since the error messages aren't in the custom range, we
-	// explicitly need to allow them. This isn't currently needed in remote
-	// mode, because custom channels are only available if both lnd and tapd
-	// are running in integrated mode.
-	if !cfg.lndRemote {
-		cfg.Lnd.ProtocolOptions.CustomMessage = append(
-			cfg.Lnd.ProtocolOptions.CustomMessage,
-			lnwire.MsgError,
-		)
-	}
-
 	// Validate the lightning-terminal config options.
 	litDir := lnd.CleanAndExpandPath(preCfg.LitDir)
 	cfg.LetsEncryptDir = lncfg.CleanAndExpandPath(cfg.LetsEncryptDir)
@@ -620,6 +607,19 @@ func loadConfigFile(preCfg *Config, interceptor signal.Interceptor) (*Config,
 	// configuration is fully valid. This also sets up the main logger that
 	// logs to a sub-directory in the .lnd folder.
 	case ModeIntegrated:
+		// For the integration of tapd with lnd, we need to allow tapd
+		// to send custom error messages to peers through the
+		// SendCustomMessage RPC in lnd. Since the error messages aren't
+		// in the custom range, we explicitly need to allow them. This
+		// isn't currently needed in remote mode, because custom
+		// channels are only available if both lnd and tapd are running
+		// in integrated mode. We need to set this value before we call
+		// lnd.ValidateConfig() below, because that's what's going to
+		// inject these values into the lnwire package.
+		cfg.Lnd.ProtocolOptions.CustomMessage = append(
+			cfg.Lnd.ProtocolOptions.CustomMessage, lnwire.MsgError,
+		)
+
 		var err error
 		cfg.Lnd, err = lnd.ValidateConfig(
 			*cfg.Lnd, interceptor, fileParser, flagParser,
diff --git a/itest/litd_custom_channels_test.go b/itest/litd_custom_channels_test.go
index 1ded9f12f..4ba604bcf 100644
--- a/itest/litd_custom_channels_test.go
+++ b/itest/litd_custom_channels_test.go
@@ -6,6 +6,7 @@ import (
 	"slices"
 	"time"
 
+	"github.com/btcsuite/btcd/btcutil"
 	"github.com/btcsuite/btcd/chaincfg/chainhash"
 	"github.com/lightninglabs/taproot-assets/itest"
 	"github.com/lightninglabs/taproot-assets/proof"
@@ -1160,6 +1161,36 @@ func testCustomChannelsForceClose(_ context.Context, net *NetworkHarness,
 	syncUniverses(t.t, charlieTap, dave)
 	t.Logf("Universes synced between all nodes, distributing assets...")
 
+	// Before we actually create the asset channel, we want to make sure
+	// that failed attempts of creating a channel (e.g. due to insufficient
+	// on-chain funds) are cleaned up properly on the recipient side.
+	// We do this by sending all of Charlie's coins to a burn address then
+	// just sending him 50k sats, which isn't enough to fund a channel.
+	_, err = charlie.LightningClient.SendCoins(
+		ctxb, &lnrpc.SendCoinsRequest{
+			Addr:             burnAddr,
+			SendAll:          true,
+			MinConfs:         0,
+			SpendUnconfirmed: true,
+		},
+	)
+	require.NoError(t.t, err)
+	net.SendCoins(t.t, 50_000, charlie)
+
+	// The attempt should fail. But the recipient should receive the error,
+	// clean up the state and allow Charlie to try again after acquiring
+	// more funds.
+	_, err = charlieTap.FundChannel(ctxb, &tchrpc.FundChannelRequest{
+		AssetAmount:        fundingAmount,
+		AssetId:            assetID,
+		PeerPubkey:         dave.PubKey[:],
+		FeeRateSatPerVbyte: 5,
+	})
+	require.ErrorContains(t.t, err, "not enough witness outputs to create")
+
+	// Now we'll fund the channel with the correct amount.
+	net.SendCoins(t.t, btcutil.SatoshiPerBitcoin, charlie)
+
 	// Next we can open an asset channel from Charlie -> Dave, then kick
 	// off the main scenario.
 	t.Logf("Opening asset channels...")