Should I update my trust and other estate planning documents?

Despite all the thought and hard work that goes into creating your estate plan, things change, and sometimes those changes will require an update to your estate plan. This article is a brief review of just a few of the reasons why you may decide to make updates to your estate plan.

Changes in Your Lifestyle

  • Getting married
  • Getting divorced
  • Moving to a different state
  • Having or adopting a child
  • Retiring from a career

The beginning or the end of your marriage could very likely make your entire existing estate plan obsolete.

Since trust law is different from state-to-state, if you move to a different state you will need new estate planning documents.

Having a child will significantly impact your estate plan if your existing documents were prepared before you contemplated having children.

The impact retirement will have on your estate plan may be less extensive, but no less important. For example, if you roll your 401(k) into an IRA are you confident that you made the appropriate beneficiary designations?

Changes in the Lifestyles of Beneficiaries

  • Marriage or Divorce
  • Chronic Illness or Permanent Disability
  • Bad Fortune
  • Bad Attitude or Financial Irresponsibility

Sometimes the spouse of a beneficiary will be included in a trust as an alternate in case that beneficiary does not survive to receive the gift. The marriage or divorce could cause you to want to add or remove such a provision.

If a beneficiary of your trust becomes eligible for public benefits because of a permanent disability, then an unrestricted gift from your trust could place that beneficiary’s eligibility for those public benefits in jeopardy when the gift is received. Specific planning can provide for such a beneficiary without jeopardizing eligibility for public benefits.

When one of your beneficiaries experiences some bad fortune, you may be inclined to make significant gifts to that beneficiary during your lifetime. If you make these large lifetime gifts, you may want to treat those gifts as an “advancement” toward the gift you provide for that beneficiary in your trust. If this is your intent, you must update your trust to specify that such gifts are advancements.

People change, and sometimes that change is not for the better. A change in the attitude or behavior of one of your beneficiaries may be so significant that you will decide to no longer provide any gift for that beneficiary from your trust. However, if you feel that one of your beneficiaries is demonstrating financial irresponsibility, but you don’t want to completely disinherit that beneficiary, then you may instead want to place restrictions on the distributions that beneficiary can receive from your trust so that your assets are not wasted.

Changes Regarding Your Successor Trustees, Executor, Agent or Guardian

  • Death or Declining Health
  • Change in Relationship
  • New Preferences

As part of your estate plan, you designated successor trustees of your trust, an executor of your will, an agent under your durable power of attorney, and a guardian for minor children.

Unless you named a sufficient number of alternates, the death of, or decline in health by, one of these people may call for an update to your documents.

An update also may be appropriate if your relationship with any of these people has changed over time or if you simply prefer to name someone else to serve in one of these roles.

Asset Values Increase or Decrease

A significant increase in the value of your property might mean that estate tax planning is now appropriate to reduce or eliminate the estate tax following a death even though such planning was not necessary when your trust was drafted.

A significant decrease in the value of your property could mean the opposite. A trust that includes estate tax planning provisions is more complicated to administer following a death. By removing these provisions if and when they become unnecessary, the trust administration expenses can be reduced.

Changes in the Law

  • Estate Tax
  • Gift Tax
  • Income Tax
  • Probate Code

The California and Federal laws that impact your estate plan change every year. Sometimes the changes are dramatic, but sometimes the changes are subtle. We do our best to notify people on our mailing list of major changes through newsletters and other correspondence. However, your estate plan may contain unique provisions that will be impacted by even small changes.