Revisit trust on a regular basis

Dear Readers:

It’s that time of the year again.

Many of you already have revocable trusts that you made years ago, or maybe your parents have been kind enough to give you a copy of theirs. Many people are under the impression that since they have a trust, they don’t need to do anything else. That’s not true. The trust you created years ago may not be appropriate for you now. Don’t blame your lawyer. Things change. What was a good idea 15 years ago may not be such a good idea today. As a rule of thumb, you should look through your trust at least every other year. If you are an optimist, do it during the Summer or Winter Olympic Games. If you are a pessimist, review your trust during the National Election. Let’s do it now. Go get your trust binder. We’ll wait.

Start with the Table of Contents, if there is one.

There should be a paragraph labeled something like, “Successor Trustees.” Turn to that page. Are the trustees you named still alive? Are they honest? Are they good with money? Do they get along with the rest of your family, or are they a source of conflict? If the eldest son you named as trustee (you know that you did) thinks that since he’s trustee he can lord it over his brothers and sisters, then he’s not the right man for the job.

Next, find the paragraph that says something like “Disposition on Death” or “Disposition on Death of Surviving Spouse.” That’s the paragraph that says who gets what when you die. Read it. Does it still make sense? Have any of your children died? Are any of your children now disabled? Do you have a spendthrift child who can’t be trusted with money? Does your trust leave your son’s ex-wife an inheritance you don’t want her to get any longer? Does your grandson have a drug problem? Maybe you need to make some changes.

Now look at the last pages of your trust. There should be a Schedule of Trust Assets. Read it. Have you moved? If so, is your new home in the trust? Are your retirement accounts listed in your trust document (they shouldn’t be). Who are the beneficiaries of your retirement accounts and life insurance policies? Did you leave your IRA to the trust? (Don’t unless your lawyer says so.)

If you’re married, find the part of the trust that talks about what happens between the first death and the second. Do you have an A/B trust that divides everything between a “Survivor’s Trust” and a “Bypass Trust” or “Exemption Trust?” If so, then maybe you don’t need or want an A/B trust any longer. An A/B trust is a great way to avoid death tax, but it’s more expensive to administer after the death of the first spouse to die.

As of Jan. 2017, up to $5,490,000 of your assets may pass free of Federal Estate Tax upon your death, and that amount goes up annually with inflation. Even better, this death tax exemption won’t expire — it will remain the law unless and until the Congress and President change it. This means that many of you with A/B trusts should restate (amend in full) your trusts to the ordinary type of trust that leaves everything to the surviving spouse, answerable to no one.

Is either you or your spouse in a nursing home? Do you suffer from an ailment that will likely put you in a nursing home before you die? Are you already on Medi-Cal running up an estate claim that will be due and payable upon your death? If so, it’s not too late to protect your assets from the cost of your medical care.

If you are not completely comfortable with the answers to all of these questions, then you need to see a trusts and estates attorney and update your estate plan.

Len & Rosie