Trust Planning Items to Review

By Tim Kirk, Heyl, Royster, Voelker & Allen

 

All revocable trusts should be reviewed every few years to make sure that they are up to date with the law and that they meet your current goals. The following is a checklist of revocable trust features that you can, and should, review periodically:

 

  1. Do you name the right beneficiaries? Typically, trusts name a spouse then children as the beneficiaries. However, family circumstances are constantly changing. Children get older and begin to experience their own challenging life circumstances. Sometimes children die first. Make sure that you still name the proper beneficiaries to your trust.

 

  1. Do you name the right successor trustee(s)? Typically, you will be the trustee of your own revocable trust with your spouse as a co-trustee (if you’re married). Trusts should name one or more successors in the event the original trustee or trustees become unable to serve. Make sure that you still name the proper successor trustee(s).

 

  1. Who can remove trustees? You can always change the trustees of your revocable trust. Do you want your heirs to have this right after you become disabled or die? This can often avoid problems if there are communication problems or disagreements with the trustee. On the other hand, you might want to limit this to some extent to make sure heirs aren’t just looking for a trustee to do whatever they say.

 

  1. Can your spouse change the ultimate distribution of trust assets after you have become disabled or die? Many trusts give surviving spouses a power of appointment to redirect trust assets at their death. This can be important to provide for flexibility to respond to changes in family circumstances. However, this usually doesn’t make sense in second marriages. Even in the case of a first marriage, removing this provision from the trust can provide protection for children and grandchildren in case the surviving spouse remarries or develops dementia.

 

  1. Does your trust protect your children and grandchildren from lawsuits and divorce? You have the option of drafting your trust to continue for your children’s lives to provide creditor and divorce protection. Does yours?

 

  1. At what age will children and grandchildren receive their inheritance? Most trusts provide that funds will remain in trust until those inheriting reach a certain age. Trusts allow you to set any age you think is appropriate for mandatory trust distributions. Many of our clients stagger distributions. A common plan is to allow the trustee discretion to make trust distributions until the beneficiaries acquire more financial experience with mandatory distributions of trust assets at ages 25, 30, 35, and 40.

 

  1. Have you funded your trust? We often see great trust documents that don’t work to avoid probate because the clients’ assets are still titled in their names. You can avoid probate as planned by confirming that your assets are titled in the name of the trust.

 

  1. Who is named as beneficiary of your retirement plans and other investments? Often, clients spend hours with their attorneys crafting an estate plan to match their goals and then circumvent it by naming individuals as beneficiaries of retirement plans, life insurance, and investment accounts. Make sure that your beneficiary designations are consistent with your overall trust planning.

 

  1. Does your trust have provisions providing for maximum tax deferral if it is named the beneficiary of a retirement plan? While you may choose to have your retirement plans go directly to your heirs—and often this is the simplest approach—if they are going to your trust, it must have special provisions to stretch out the annual required distributions for as long as possible.

 

  1. Is your trust up-to-date for estate tax purposes? Federal and Illinois estate tax laws have changed several times in recent years. Many older wills and trusts contain outdated “formula” estate tax planning provisions that won’t work very well today. If your trust is more than a few years old, or if you lived in a different state when it was drafted, it should be reviewed by an estate planning attorney to make certain that it is still current.

 

As always, we encourage people to seek the advice of a qualified local attorney when doing their trust planning.

 

For more information, you may reach Tim at Heyl, Royster, Voelker & Allen, 300 Hamilton Blvd., Peoria, IL 61601, or call (309) 676-0400.

 

 

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