Is your living trust up-to-date? (part 2)


If you have a living trust, it’s a good idea to review it every few years to make sure that it still meets your goals and is up-to-date with the law. Here are some common issues and problems you might want to consider:


  • Have you funded the trust? It’s not uncommon for people to set up a trust and then forget to re-title their assets so they are included in the trust. But this mistake can destroy all the benefits of having the trust in the first place.
  • Have you reviewed your beneficiary designations? A trust should be coordinated with assets outside the trust that have beneficiary designations, such as bank and brokerage accounts, IRAs, 401(k)s, life insurance, etc. These designations should be reviewed every few years to make sure they’re current and coordinated with the trust as part of your estate plan.
  • When do children and grandchildren receive their inheritance? Most trusts provide that assets will remain in the trust until those inheriting them reach a certain age, such as 21. But it’s important to note that not all 21-year-olds are responsible enough to handle an inheritance. You can change this age if you want. You can also provide that assets will be distributed over time. For instance, a third of the assets might be distributed at age 25, another third at age 30, and the remainder at age 35.
  • Is the trust the beneficiary of a retirement plan? While you can choose to have your retirement plan assets go directly to your heirs – and this is often the simplest approach – there can be tax advantages in leaving these assets to a trust, where the tax deferral can be stretched out over many years. However, this requires some very technical provisions in the trust, and it’s important to make sure these provisions are current.
  • Is your trust up-to-date for estate tax purposes? Congress and many states have changed the estate tax laws several times in recent years. If your trust is more than a few years old, or if you lived in a different state when it was drafted, it should be reviewed by an attorney to make sure it’s still current and that you’re getting all the tax savings that are available.
beneficiary designations, estate tax, living trust

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