Do You Need to Update or Amend Your Trust? 6 Reasons to Amend Your Trust
Do You Need to Update or Amend Your Trust?
So you’ve been proactive in creating a Trust for you and your loved ones, but is now the time to amend your Trust? Here are 6 reasons to amend your Trust:
1. Your Children Are Now Adults
Most people first consider estate planning when they have young children. You created a Trust to ensure that should something happen to you, your children would be protected. At that time, you had to make many assumptions regarding the type of person your children would become. Often times our clients will use their own life experiences to come to some general planning ideas for their children. While this is certainly logical and reasonable, our children have a way of having minds of their own. What may have made sense when your children were young, may not make sense now that they are adults, getting married and having children of their own.
If your Trust provides for distributions to your children at a certain age (for example 18 or 21), and your children are now over that age, you may want to consider amending your Trust. Also, you may consider amending your Trust to provide Lifetime Trusts for your children to ensure protection from spouses or future lawsuits. You may also want reallocate the division of your assets to your children. For example, you may have chose to help one child buy a house, but not another. You may consider amending your Trust to reduce the share to your child that has already received gifts from you.
2. You Have Additional Children
If at the time you created your Trust, you only had one child, the Trust may not contemplate the division of your assets among your children. There are certain laws that will force assets to be distributed to children who were not born at the time the trust created, however there are several problems with that solution. You should consider amending your Trust to provide for what is commonly referred to as a “Pot Trust.” The Pot Trust will provide for all of your children until they reach a certain age. At Modern Wealth Law, even if you only have one child, we typically plan for additional children and include a Pot Trust.
3. Your Trustees are No Longer the Right Fit or No Longer Available
The Trustees you chose to manage your assets may no longer be the best fit for your beneficiaries. Your Trustees may have been your parents or a friend that has moved or is no longer available. As you get older, you may want to amend your Trust and add a Trustee in a younger generation. The Trustee may be a child/beneficiary, or some other person you trust to manage the assets for your beneficiaries. At a minimum, you should consider naming a younger Trustee as an alternate to your primary Trustee.
4. Asset Protection
As you accumulate more assets, you and your family become bigger targets for potential lawsuits. You should considering amending your Trust in a way to maximize protection against future lawsuits. You may also want to consider domestic or foreign asset protection trusts to protect your assets.
5. Your Trust was Created Before 2012
The concept informally known as “portability” was introduced in 2012 through the American Taxpayer Relief Act of 2012. Portability allows a surviving spouse to use a deceased spouse’s unused estate tax exclusion. Don’t worry. It’s not important to completely understand that for purposes of this discussion. You do need to know that most Trusts created before 2012 forced married couples to create a Bypass Trust (also known as a an Exemption Trust of Credit Shelter Trust) to utilize the deceased spouse’s estate tax exemption. If your Trust requires the creation of a Bypass Trust, or what is commonly referred to as an A-B Trust, you may want to amend your Trust to reduce future complexity and minimize future income taxes.
6. Your Estate is No Longer Subject to Estate Tax
The estate tax exemption has increased from $675,000 in 2001 to $11.2 million in 2018. While your estate may have been over the exemption in 2001, the need for some of the more complex structures may no long be needed. Furthermore, you may need to amend your Trust to provide for income tax savings over estate tax savings.
Ready to Amend Your Trust?
Has your original attorney retired? At Modern Wealth Law, you will not be left starting from scratch ever again. Please contact, John L. Wong, Orange County estate planning attorney to learn more about amending your Trust and how you will always have an attorney at Modern Wealth Law to assist you with any future amendments.
John Wong advises on all aspects of estate planning, probate, asset protection and trust administration. He believes that estate planning is about planning for life; while having protections in place should the unexpected occur.
