Why Should I Update My Trust? Tips from the Estate-Planning Attorney

Why Should I Update My Trust? Tips from the Estate-Planning Attorney

As a trusted Estate-Planning Attorney in Walnut Creek, I spend a lot of time talking to my clients about trusts. You worked very hard for your assets, and it’s crucial that you take the time to designate how you want your assets designated to your beneficiaries. Preparing in advance will eliminate the hassles, expenses, and red tape that can go along with not having a trust.

Redefining What a Trust Is

  • A trust is a legal document that ensures how assets and finances are held for an individual or individuals. Trusts can be arranged in many ways with specific directions as to how and when assets will be passed to your beneficiaries.
  • In estate planning, trusts are often used to ensure that your loved ones are provided for exactly the way you wish. Trusts can hold assets in a specific legal standing to avoid estate taxes or other penalties.
  • When a trust agreement is set up, the arrangement takes into account the present needs, laws, and situation.
  • A trust is a document that needs to be updated as time passes. For several reasons, it can be crucial that you update your trust so that it is not stale, leaving you and your loved ones vulnerable to complications.

Let’s take a look at some of the main reasons to update your trusts…

Your Children Have Grown Up & They’re Now Adults

If you planned to use a trust to provide for your children when they were minors, and they are now grown, you likely want to shift your trust terms. As needs arise, trust money can be re-allocated to attend to different circumstances. What once was money set aside for college can now be set aside for a house, investment, retirement, or the needs of your grandchildren.

Laws Have Changed Regarding Taxes or Trusts & Administration

Trusts are subject to federal and state laws that govern how assets can be taxed and administered. As laws change, you want to hire a knowledgeable estate planning attorney who will help you keep your trusts current. Look for someone who keeps up-to-date on the new laws and rules.

Changes in Your Assets & Finances

Whether your assets and finances increase or decrease, any changes are a major reason to update your trusts. A career change, inheritance, investment, or purchase or sale of property can all alter your assets and finances. These changes might affect your tax status and the extent to which your assets will or will not be subject to estate tax. It’s crucial that you find a trusted tax and estate planning attorney who will advise you and advocate for your needs and those of your beneficiaries.

Marriage & Divorce

Changes in your marital status are a major reason to update your trust. Remarrying and replacing a former spouse may alter the executor of your trust. Providing for children from past marriages and making arrangements for children in the current marriage are also strong reasons to update your trust.

Life’s Changes Require a Trusted and Experienced Estate Planning Attorney

If your life plans are altered by situations in and out of your control, you need to turn to an experienced estate planning attorney. Get in touch with Mendes Weed, LLP today!

Mendes Weed offers a unique combined focus on Trusts & EstatesTax LawTax Litigation, and Business Law. Principal Attorney Christina Weed is Chair of the Tax Section of the Contra Costa County Bar Association and is also a member of the Estate Planning Council Diablo Valley and the Tri-Valley Estate Planning Council.

Mendes Weed, LLP has offices in Walnut Creek, Oakland, San Francisco, and San Jose.

 

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Estate Planning Tips: How to Modify an Irrevocable Trust

Trusts ensure a secure future for an individual’s family and loved ones. While trusts are geared toward building a secure future in the long term, sometimes laws change and a trust becomes less relevant to modern needs. In that case, trustees may need to modify the terms trust of their trusts. This can be a complex process when the existing trust was established as an irrevocable trust.

When an irrevocable trust is set up, the grantor relinquishes their right to modify or revoke the terms of a trust. This can be done for many reasons, including improving the grantor’s tax liability. If an irrevocable trust needs to be modified, trustees have a variety of options.

Here are some ways that an irrevocable trust can be modified:

Trust Modification by Consent

Tip: Useful when everyone involved wants to modify the trust.

An irrevocable trust can be modified if the grantor and all of the trustees agree on the terms. All parties work with an attorney to file a consent form. This method requires all trustees and the grantor to consent; meaning that a consent form is only valid if the grantor is still living. If a trustee is a minor at the time, their parent or guardian may consent on their behalf.

It is also possible to appoint a “trust protector” who is able to review a trust agreement and advise trustees on what changes they may want to make. This is especially useful, as an attorney can see opportunities or potential problems unique to irrevocable trusts.

If you are looking into modifying an existing trust, it is important that you consult an experienced attorney. Get in touch with Mendes Weed today to start modifying an existing irrevocable trust.

Trust Modification by Court Approval

Tip: Useful when the grantor has died, and the trustees want to modify the trust’s terms.

When the grantor is not able, or is unwilling, to consent to a modification or termination of an irrevocable trust, the trustees can petition the Superior Court. This method requires an experienced attorney to help file the right paperwork, and to keep the modifications in line with the grantor’s intent. Intent is a major factor in how the court decides to approve modifications to an irrevocable trust.

Court approved modifications are best achieved when all trustees agree to the proposed modifications. However, not all trustees must consent. If not all trustees consent, then the court must make their decision based on whether or not the non-consenting parties will be adequately protected.

Tip: In both consent and court approval situations, it is important to show that the modifications are going to support the grantor’s intent.

If you’re ready to talk about modifying an irrevocable trust today, get in touch with Mendes Weed.

Decanting a Trust

Tip: Useful when the existing trust is not able to meet the grantor’s intent or the trustee’s needs, and a new trust should be formed.

Note: Keep in mind that only some states have decanting statutes. Get in contact with an experienced attorney near you for more information.

Decanting is the process of establishing a new trust, transferring funds from the old trust into the new trust, and ensuring that the new trust has favorable terms. In order to decant an existing irrevocable trust, the trustee have discretion over the principal of the trust. Decanting is an increasingly popular method and can be used to expand terms to provide for further generations, allow room for a financial advisor, protect against bankruptcy or divorce, or to manage tax liability.

Decanting a trust can be a complicated process, and it’s crucial that you find an experienced attorney to assist with the process. Are you ready to take a look at your existing trust today? Get in touch with Mendes Weed, LLP.

We serve Walnut Creek, San Ramon, & Danville, as well as the entire East Bay.

Disclaimer: The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

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