Life can change rapidly. People marry, have children and grandchildren, sometimes divorce, deal with the death of family members, buy, sell and inherit property. And that barely scratches the surface. On top of that, estate and tax laws change. Life and legal changes can sometimes render your trusts obsolete or create conditions where your trusts produce unintended results. That’s why it’s important to regularly review your trusts.
Changes in the Law
Changes in state and federal estate and tax laws can impact your trusts in any year, but if you have not reviewed your trusts since the Tax Cuts and Jobs Act went into effect on January 1, 2018, you need to do so immediately. It has no effect on irrevocable trusts, but it may render some other trusts obsolete. The new tax law doubled the federal tax exemption from $5.5 million to $11 million with yearly adjustments for an individual and double that for a married couple filing jointly. Therefore, if your estate is in excess of $5.5 million, some changes may be in order. A trust designed to avoid estate taxes may no longer be needed.
Check that your executors, trustees and any other agents are still appropriate. Has anything occurred that might make a change desirable?
Check whether you need to make changes regarding the beneficiaries of your trust. Has a grandchild been born for which you would like to provide? Has a beneficiary passed away? Perhaps you would like to make changes in the disposition of the assets due to a change in relationship. Or you may desire to alter when assets transfer to beneficiaries. If a charity or other entity is the beneficiary of a trust, check that names and other information are updated.
If you have bought or sold significant property or received an inheritance since the last time you reviewed your trust, be sure that your trust covers that property and its disposition in the way you desire.
It’s particularly important to keep trusts that cover business up to date. If you have a new partner or there is another change in ownership, be sure your trust still reflects your desires. Or maybe you expected your progeny to take over the family business, but they are no longer interested in doing so. Your business may be left in chaos if you don’t leave an appropriate plan in place.
Your finances may have dramatically shifted since the time you created your trust. The financial climate can cause changes beyond your control. Values of assets may have dipped or increased. If your financial picture has changed, your trust may no longer fill your needs.
Have you changed your residency or are you planning to do so? Or maybe you bought an out-of-state vacation home and unexpectedly find yourself spending half your time there. Where you call home is important to how your trusts will be interpreted and what state estate taxes must be paid when you die. If you are not sure about any of this, contact your experienced California estate attorney.