Many people choose to create a revocable living trust as part of their estate plan. Living trusts may be created for different reasons, and they have several different advantages, including potentially reducing estate taxes, avoiding probate, and allowing for a trustee to manage one’s financial affairs in the event one becomes incapacitated.
A living trust should be created with the assistance of a qualified estate planning attorney, and it should also be reviewed, along with the entire estate plan, on a periodic basis. Circumstances may change, and one should review an estate plan to make sure that it accurately reflects one’s wishes.
One of the most important aspects to review is the identity of the trustee. Typically, for a married couple, the spouses will be co-trustees of each other’s trusts. However, the trust should also name a successor trustee to serve in the event the original trustee or co-trustee is not able to do so. When reviewing one’s living trust, it is important to make sure that the person named is still the person one wants as successor trustee. As one ages, there may come a point when one wishes for an adult child, who may have been named as a successor trustee, to begin serving as co-trustee. In a case in which spouses are co-trustees, an important question to consider is whether one wants a successor trustee to begin serving when just one spouse is incapacitated, or when neither can no longer serve as trustee.
Another crucial element to examine upon review is the funding of the trust. In order for a trust to accomplish its purpose, it must be properly funded. As part of a review of an estate plan, it is important to make sure that all the assets one wishes to be transferred to the trust have been transferred. The advantages of the trust will not apply to assets still titled in the individual’s name. One should review the beneficiaries of investment accounts and retirement plans to ensure that they are named in accordance with one’s wishes.
If a trust is set up in part for the purpose of protecting assets from the potentially unwise spending habits of the beneficiaries, then one should also review these provisions to make sure they are set up properly. Many trusts provide that some funds are only transferable to the beneficiary when the beneficiary reaches a certain age. In addition to reviewing these provisions, one should consider whether one wishes for beneficiaries to have the power to replace the trustee, and whether one wishes for a surviving spouse to have the power to change the terms of the trust.
A final aspect should be reviewed with the help of one’s estate planning attorney. Estate tax laws are subject to change, and it is important to review one’s entire estate plan every few years to make sure that one is taking full advantage of applicable strategies for reducing one’s estate tax burden.
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