The beginning of the year is a perfect time for getting organized. It is also a perfect time to review your estate planning documents to ensure that your documents still reflect your wishes. When reviewing your estate planning documents, you should consider the following:
- Was Your Trust Prepared Before 2012? If your Trust was prepared prior to 2012, it may not take into account the current tax laws. Many Trusts established before 2012, require that all trust assets be divided upon the death of the first spouse. This type of Trust is often referred to as an “AB Trust” or “Bypass Trust”. In 2012, the tax laws changed significantly and 99% of families no longer need to divide all Trust assets following the death of the first spouse. If you have an “AB Trust” or “Bypass Trust”, it is critical that you amend your Trust prior to the incapacity of a spouse. Failing to remove this provision, can drastically increase the cost of the trust administration following the death of the first spouse.
- Are your Trustees and Beneficiaries Current? If a designated Successor Trustee has died or is no longer able to serve as your Trustee, you should amend your Trust to update this information. Also, make sure to review your beneficiaries and distribution scheme. Are your current distributions still appropriate? Do you have new grandchildren you wish to provide for? Is a beneficiary having emotional or drug problems, which might make a Special Needs Trust more appropriate for their distribution?
- Have You Funded Your Trust? Did you transfer your real property to your Trust? Did you transfer your brokerage accounts? Bank accounts? The terms of your Trust only control trust assets so you need to understand exactly what assets are in your Trust.
- Does Your Trust Have Incapacity Planning Provisions? Some older Trusts do not have any Incapacity Planning provisions. Specifically, your Trust should have provisions on how incapacity will be determined, how assets will be used during any period of incapacity, and specific instructions on care. Do you want to stay at home as long as possible with in-home care? Do you want to live near a child or relative? If you don't state your wishes, your Trustee will be forced to make these decisions on your behalf.
- Have You Talked to Your Children and Loved Ones? Do your children or loved ones know that you have an estate plan? Do they know where you store your original estate planning documents? Do they know who your attorney is if they need help? While these conversations can be difficult, they are very important to ensure your children understand your wishes.