If your living trust is five or 10 years old or more, it might look fine on its face. But there may be problems hiding within your estate plan that will rear their ugly heads when it is time to put your trust document into action. The time to fix these issues is now, before they cause headaches for your heirs and beneficiaries.
A California trust attorney can help you update your documents and answer your questions about changes you might need to make. Let’s go over five hidden traps in outdated living trusts.
State and Federal Tax Laws Change
State and federal laws that can affect the tax treatment of assets are constantly changing. Even in years when the tax code itself does not change, previous changes to the tax law get phased in over quite a few years. In other words, a change to the tax law in one year can make things different every year or so for the next five years or more.
Your estate planning documents, including your living trust, should strive to maximize the benefits of current tax law. However, since the tax law is a moving target, your attorney may need to tweak your living trust periodically to keep it running optimally. You could view these updates like taking your car in for a tune-up.
Your Assets and Family Situation May Have Changed
Your living trust can only manage and distribute assets that you title in the name of the trust. Think about the assets you had 10 or 15 years ago. How many of those things do you still own? Are all of your current assets part of your living trust?
Some of your assets, like your retirement account, have likely increased in value significantly since the drafting of your current living trust. You will want to make sure that you evaluate the current values of all your assets when considering the fairness of the distributions to your beneficiaries.
The Federal Estate Tax Cutoff is Different
For many people, their estate plan involves trying to minimize estate taxes by engaging in gifting during their lifetime and charitable contributions. You will want to review your living trust in light of the current federal estate tax cut-off and the anticipated changes to the amount of value your estate can have before federal estate taxes apply.
Your Goals Have Changed
What you wanted to accomplish when you initially set up your living trust has likely changed over the years. Let’s say that you had kids in high school when you created your original living trust. Twenty years down the road, you are probably less focused on making sure they can go to college. You might want to re-shuffle the deck to create a longer legacy plan, including providing for your grandchildren.
Your Marital Status Can Change
After the passing of 10 or 20 years, the marital status of people in your family might have changed. You might have divorced or remarried in that time. One or more of your children or other beneficiaries might have married, had children, or divorced. Your older living trust was a snapshot of your life and the people who were important to you at that time. You will now want to update your trust to make sure it will accomplish your new goals based on your current situation. You should contact a California estate planning attorney to get started. Contact our office today for help, we offer a free consultation.