It would be great if an estate plan were something you could just set and forget, but life rarely works that way. Many people take responsible action and develop an estate plan that will provide tax savings and protect their assets for their spouses and children. If they don’t update those plans to reflect changes in life and the law, however, those careful plans may turn out to be ineffective.
Trusts are a very good example. You may have set up a trust just a few years ago, but it could already be obsolete. Congress changed the federal estate tax laws in 2013 to make it easier for surviving spouses to get their full deduction even if their deceased spouse had not set up a QTIP or AB trust.
If you initially set up your trust in 2012, that probably doesn’t seem very long ago. Still, if a QTIP or AB trust was part of your strategy to maximize your tax benefits, it might not work out as you expected. The courts will certainly do their best to interpret your intentions, but who wants their loved ones to have to go to court? Moreover, leaving an outdated strategy in place may mean missing out on new opportunities.
Life changes, not just tax law changes, also call for a trust review
For your trust to operate correctly, it relies on a variety of ordinary, everyday things remaining true. For example, suppose your intention was to put most or all of your assets into the trust so your family can avoid probate. Later on, if you acquire a large new asset and forget to put it into the trust, your goal of avoiding probate will be defeated.
You should also update your trust and other estate planning documents if:
- Potential beneficiary changes are needed because someone is born, gets married, gets divorced or dies
- Your trustee dies or trustee service goes out of business
- You sell trust assets
- The value of your total estate changes substantially
- You move to another state — even if most of your assets are still in California
A good estate planning lawyer will anticipate many possible changes when drafting your trust, but not all changes are foreseeable. If you made the effort to put a plan in place, you owe it to yourself and your loved ones to keep it up to date.