The turn of the calendar is a great time to consider whether your estate plan needs updating. With frequent changes in the law, the estate tax exemption, and your own portfolio, even recent plans should be reviewed. Here is a list of the top five items that you should consider when coming in for your Generations trust review.
1. Are my successor trustees still correct?
By and large, your choice in trustee will determine the success of the administration of your trust. To use a football analogy, I call this the “red zone offense.” You have spent your life amassing and caring for your wealth. In the end, it is your successor trustee who will be responsible for stewarding the transfer of that wealth to the next generation. For this transition to be successful, as when a corporation grooms a successor CEO, the successor trustee or other agent will be in a better position if they understand their responsibilities and have been groomed for the task.
2. Are my assets properly titled in my trust?
If not, is there a good reason why not? And is the titling of each asset properly listed on the Schedule of Assets? Over the years, I have found that when a client dies, one of the first items I discuss with the successor trustees is the Schedule of Assets. As a part of our Generations funding assistance, you are entitled to an asset review every three years. Make sure to provide our paralegals the appropriate funding information, such as a bank statement or retirement account statement with an account number. An up-to-date Schedule of Assets is an essential historical record that helps ensure a smooth trust administration.
3. Does my funding clause still make sense?
As a refresher, the funding clause is the portion of the living trust that determines which subtrusts, if any, are funded with trust assets at the death of a trustmaker. It may need to be updated if tax laws change. Unless action is taken by Congress, the $11.7 million exemption will revert back to $5 million indexed to inflation, effective January 1, 2026. When we hold our Generations trust review, the trust funding clause (or lack thereof) is one of the items the attorney will discuss with you.
4. Do I need a Trust Protector incorporated into my trust plan?
It has been said that people overestimate what will change in two years, but underestimate what will change in ten. In the 16 years I have been with the firm, I have been amazed at how rapidly and continuously things have changed. With the development of a concept called a Trust Protector, the trust can allow for an independent third party to make technical revisions to the trust. Using a Trust Protector provides flexibility for changes you may never have been able to anticipate.
5. Should I make a gift now?
This is a counseling issue specific to the client and the current and anticipated future situations of the beneficiaries. What may not have made sense ten years ago may make sense now. As the attorney, my goal is to understand the client’s needs and what kind of gift they are making; i.e., cash, a house, appreciated stock, etc. The advice I give and the ensuing tax implications are highly dependent on the asset, the client, and the beneficiary. These five things to consider are just some of the items that the attorneys at Foley & Pearson, P.C. review with our clients at trust review appointments. We hope you find them helpful, and we look forward to seeing you in 2021.