I write a lot about the importance of reviewing and updating your living trust estate plan on a regular basis. It's important for you, but it's really important for your parents, which is really important for you.
If you die and your living trust estate plan is out of date or not funded, it's a big problem. But chances are your parents will die before you, and therefore, there should be urgency in getting them to an estate planning attorney to review and update their living trust estate plan. Otherwise, their estate plan may be a ticking time bomb that will detonate around you and your siblings.
One-and-done doesn't work in estate planning. Just like one-and-done doesn't work for keeping your family together, your job, your business, working out, health, nutrition, dental work, and taxes.
Life is constant. Life moves on. And your living trust estate plan must keep up. You don't get brownie points for putting together an estate plan 20 years ago. A living trust estate plan either works or it doesn't. And it doesn't work if it is outdated.
Below is a post from the X account of @KurtSpeCPA, which illustrates the point:
Father dies at 81. $2.7M estate. Three adult kids.
He set up a trust in 1998. Never updated it.
Kids can't touch principal until age 65. They're currently 52, 49, and 46.
The trustee? His brother who died 6 years ago. Nobody caught it.
Now a bank is the successor trustee. Charging $36,400/year in fees.
The trust references his then wife getting income. She died in 2015. He remarried in 2017.
His second wife gets nothing. The trust still pays his first wife's estate.
His 52-year-old daughter is a teacher. Makes $78K. Renting an apartment.
She gets $14K/year from the trust but can't access principal to buy a house.
The trust was written when his estate was $800K. Nobody adjusted for $2.7M.
"Dad was so careful about planning."
26 years ago. Tax laws have changed many times. His family changed twice.
He spent $5K on that trust in 1998. Never spent another dollar reviewing it.
Now his kids are paying attorneys $40K to petition the court for trust reformation.
The court might fix some of it. Decanting could help. But it's expensive, time-consuming, and not guaranteed.
They're not fighting over money. They're fighting a document written for a different family in a different tax code.
Your estate plan has an expiration date. Just because it's signed doesn't mean it still works.
Review your estate plan every few years and with any major life change (births, deaths, marriage, divorce) . Or pay for your kids to fix it in court later.
This was a relatively sophisticated living trust: the dad wanted trusts for each of his children with no access to principal until they were 65 - essentially a nest egg for their retirement. And he wanted an income stream for his then-wife. This appears to have been a thoughtful estate plan with good intentions at the time. But life isn't static. He remarried; his children's needs changed; housing became very expensive; and there was nothing for his new wife and no principal distributions from his children's trusts until 65. And he didn't have a backup trustee, so a bank had to take over and is draining the trust with trustee fees.
What seemed like a well-designed estate plan at the time now looks short-sighted.
Your family will change, your children's needs will change, your successor trustees may die or move away, the economy will change, and estate tax laws will change.
No matter how smart and well-intentioned you are, you can't predict the future.
Your best hedge against your lack of prophetic powers is to review and update your living trust estate plan periodically.
How often should you review it? In most cases, every five years or so should be sufficient. But if you have big interventions in your life like: divorce, remarriage, new child, death in the family, new home, need to change your successor trustees or agents, new investment accounts, etc., you need to update your living trust estate plan right away.
An up-to-date and funded living trust estate plan will protect your family and assets and leave a powerful legacy for your family. A dusty, old, out-of-date plan will fall woefully short.
Think about it.
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