There are several reasons why you should update your trust or perhaps your entire estate plan. While estate planning documents do not necessarily have a shelf life, they may not fulfill your goals when your circumstances change. You cannot avoid the need to update estate planning documents when your circumstances change. But, how do you know when you should make changes?
Reasons to Make Changes: It is important to note that just because you have a trust in place does not mean you are bound to keep it as is; this is even true if the trust was inherited from someone else. Indeed, there is more than one way to make necessary changes: sometimes you can establish a new trust or simply revise the terms of an existing trust. Finally, making changes to an existing trust – and other estate planning documents – can help you save money and costs, and it may allow you to make better investments decisions.
Below are some reasons to update a trust or other estate planning document that determines how your assets will be disposed of at the time of your death or incapacity.
Your marital status changed: This situation nearly always affects what a person wants to do with his or her assets upon death or incapacity. A new marriage should prompt you to define your spouse’s share of the assets. Otherwise, local intestate laws will dictate their distribution. When there are children from prior marriages, a second or subsequent marriage should alert you to put together an estate plan that addresses your blended family. Although divorce may automatically remove your spouse as a beneficiary under your will, it always makes sense to have a comprehensive review of your estate plan after a divorce. Don’t forget beneficiary designations for life insurance, retirement plans or other assets to be distributed to named beneficiaries – or to a trust for privacy and asset protection purposes.
Children entered the picture or grew up: When children have joined your family through a recent birth, adoption, or blended family, you need to have a plan in place in the event something happens to you. This is particularly true if you want to determine how and when the children receive the funds they will inherit, which can be addressed with a trust. Likewise, your old trust may have been written years ago, when the children were still minors. Circumstances have likely changed since then. You may want to update the trust to better match your family’s current needs. Children may marry and the child’s spouse create a need to modify the provisions for distribution of assets to the child. Or, a child may suffer a medical or physical disability that requires additional protection, perhaps in the manner of a special needs trust.
Tax laws have changed: Over the past few years, federal estate tax laws have undergone significant changes – and even more so over the past 15 years. A trust that was initially designed to avoid estate taxes may now just unnecessarily tie up your assets. This may be a reason to “unwind” a trust when the tax reasons are no longer necessary.
Your choice of trustee has changed: Your chosen trustees and other fiduciaries may no longer be able to handle the administration of your estate, have moved to a different state or country, or there may be new relationships that create a better choice for your fiduciaries. Be sure to review and update your trust and other estate planning documents at least once a year and make any updates to your choice of trustee, beneficiary, executor, trust protector, or other fiduciary relationships you may have established in your estate plan.
Your assets have changed drastically: Updates to your old trust and other estate planning documents are likely needed if you have experienced a substantial change in assets. This may need to be addressed if you have inherited or earned enough assets to exceed the estate tax exclusion, which is $11.4 million in 2019. Similarly, your assets may have diminished or been used up for medical treatments, or travel, or the kid’s college education. Either significant enhancement or loss of assets can create many issues with who your beneficiaries may be, or how you want to allocate your assets to various beneficiaries.
Get Good Advice
While these are the most common reasons to update your trust, they are not the only impetus for giving your estate plan a tune-up. Even if you are unsure whether to update your trust or whether there are changes that are necessary, be sure to seek out a qualified estate planning professional to help you make sure you and your loved ones are well prepared for the future. Give us a call today, we’re here to help update your estate plan to ensure your needs, goals, concerns and aspirations are met.