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.
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.
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, which is $11.4 million in 2021.
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. Give us a call today, we’re here to help.Read more »
When most people think of estate planning, they think of assets that include money, real estate, and personal property. But, included in someone’s estate could be invaluable personal property, such as family heirlooms or keepsakes. This type of property should not be overlooked in your estate plan just because it may not have a high dollar value because it still has sentimental value that cannot be quantified. Part of a thorough estate plan is determining how you want these priceless family heirlooms and keepsakes distributed once you are gone.
Issues You May Face
An “heirloom” is a particular piece of personal property passed down from one generation to the next, and will continue to be passed down for generations to come. Be sure to talk about the family heirlooms and keepsakes with your family so that feelings and expectations regarding these items are out in the open. Also think about having your heirlooms and keepsakes appraised, if possible, by someone reputable so you can provide your heirs with the necessary documentation and so the items can be appropriately identified in your estate planning.
How to Distribute
When it comes to family heirlooms and keepsakes the typical division plans may not work. If the item is of low dollar value, there may not be a way to monetarily equalize the distributions. This can also be the case if the dollar value of the keepsake is incredibly high compared to the value of the remaining estate. Furthermore, if there is only one of such an item, there is no way to split one item between multiple people. Whether it’s great-grandfather’s WWI medals, the cherished family crystal, or your mother’s pearls, you will need to decide the best way to distribute these assets based on your unique family situation. Regardless of who receives these items, they are usually distributed by way of a personal property memorandum in those states that permit this practice.
The personal property memorandum allows you to express your wishes and avoid the hard feelings that could come about by leaving all of the personal property equally to your children. This document is a written statement regarding specific property; the document is then referenced in your last will and testament or living trust and identifies who should inherit what property. This document also has the added benefit of being able to be modified or revised without the need to execute a new will or amend your trust. However, please remember, items listed in a personal property memo must be personal property –not real estate,cars, or bank accounts.
Gifting During Life
Because of the sentimental nature of family heirlooms, you may want to consider gifting these items during your lifetime instead of waiting until your death. If you gift your family heirlooms and keepsakes during your lifetime, there is a personal joy in witnessing your loved one receiving the family treasure. That being said, be careful of gift tax issues that may be incurred depending on the value of the item. Another concern that you may want to address depending upon the value of the family heirloom is whether or not this lifetime gift should be considered part of the recipient’s share of your eventual estate.
Estate Planning Advice
A comprehensive estate plan that considers all assets –including family heirlooms and keepsakes –is key to making sure your wishes are followed once you are gone. Contact us to learn about your options under applicable law and to ensure that all of your assets, no matter the monetary value, are covered under your estate plan.Read more »
Most families are happy families. They get together for the holidays, share laughs, and tell stories. Everyone gets along and enjoys each other’s company. Then, the matriarch or patriarch dies. Suddenly, years of pent-up resentment and hurt feelings bubble to the surface, and the once-happy family is now embroiled in litigation over the decedent’s estate.
When everyone is alive and happy, it is easy to think that nothing will break a family apart. Many people think that since everyone is getting along, estate planning is not needed because everyone will look out for one another and do what is fair. However, it is crucial that you have a properly prepared estate plan. Failing to plan not only takes all of the control out of your hands, it can also leave hurt feelings and possible confusion over what your true wishes were. This confusion will force family members to the only source able to remedy the misunderstanding: the probate court.
While a lack of planning can lead to disastrous consequences, poor planning can be just as harmful. Documents that are not up to date, vague, or improperly prepared can lead family members to challenge them. If the documents are not clear, family members may have differing opinions as to the true intention of the decedent. This is especially unfortunate for those with a trust: One of the primary reasons to have a trust prepared is to avoid court involvement.
If your documents are up to date and clearly state your intentions, but you worry that your decisions may displease your family, you do have the ability to include a no-contest clause that may prevent or limit challenges to your will or trust. A no-contest clause is a provision that states that if a person contests your will or trust—whichever document contains the clause—and is unsuccessful, they will receive nothing. However, their effectiveness can vary from state to state, so if you think your family might contest your wishes, it is incredibly important to seek the help of an experienced estate planning attorney.
One common situation where contests can arise is when someone is left out of the will or trust. If you want to intentionally disinherit a family member, consider leaving them a nominal amount at your death and using a no-contest clause. By doing this, if the contest is unsuccessful, the family member has something to lose. This may discourage them from contesting your wishes in the first place. However, as previously mentioned, you need to work with an experienced estate planning attorney to make sure that this strategy is the best one for you based on your state’s law and your family situation.
As an alternative, if you are concerned about a beneficiary receiving a sum of money outright because of creditor issues, spending habits, etc., you do not need to disinherit them. By utilizing a discretionary trust, you can set aside money for the individual that is distributed to them when and how you determine. Leaving money to a family member does not have to be an all-or-nothing decision.
Regardless of your family situation, it is incredibly important that you have a well-drafted, up-to-date estate plan in place. Will or trust contests can be very costly and can quickly drain the estate or trust, which means your loved ones will end up with less than you intended. We can assist you in creating an estate plan that will ensure that your wishes are carried out and that harmony can be maintained within your family after you are gone. Give us a call today to schedule an appointment.Read more »