There are several reasons why you should update your existing 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. Of course, having estate planning documents that are up-to-date is critical, 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.
- 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.
- 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.
- 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: Be sure to check your trust and other estate planning documents once a year and make any updates to your choice of trustee, beneficiary, executor, and so on.
- 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; the tax provides a lifetime exemption of $11.58 million per donor in 2020.
Get Good Advice
While these are the most common reasons to update an old trust, they are not the only impetus for giving your estate plan a tune-up. Even if you are unsure whether changes to your old trust 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. Call or contact us today.