Reviewing your revocable trust is essential to ensure it still aligns with your goals and complies with current laws. Many Minnesotans believe that once they have created a revocable trust, they are set and no further steps are needed. Yet our lives are not static so our revocable trust shouldn’t be either. Here are the top reasons why you should periodically review your trust.
In the following video, Minneapolis estate planning attorney Phil Ruce explains how to change you revocable trust once it has been drafted.
Why Should You Review Your Trust Regularly?
Have There Been Any Changes in Your Life?
Life changes often necessitate updates to your trust. Key changes include:
- Marriage or Divorce: Marrying or divorcing can significantly impact your estate planning needs. For instance, spouses often name each other as co-trustees for a revocable trust, which must be updated for a second marriage or if the surviving spouse remarries. Update your trust to reflect new relationships.
- Birth or Adoption of Children: New children or grandchildren may need to be added as beneficiaries.
- Deaths: If a trustee or beneficiary has passed away, you’ll need to update your trust to reflect this.
Are Your Successor Trustees Still Appropriate?
Revisiting the list of successor trustees is crucial. Ask yourself:
- Are the trustees you named still alive or still in your life?
- Do you still trust them to manage your estate?
- Do they have the necessary financial acumen and familial harmony to handle the responsibilities?
- Does the trust give your heirs the authority to remove successor trustees?
If your answers to any of these questions raise concerns, it’s time to update your trust.
Is Your Trust Properly Funded?
One of the biggest issues with revocable trusts is improper funding. This means all intended assets are not transferred into the trust. For example, one of our clients created a revocable trust and successfully avoided probate by transferring her house into the trust. However, when she later sold her house and purchased a condo, she forgot to transfer the new deed into the trust. As a result, the condo was not protected by the trust and had to go through probate after she passed away. Not only is it essential to properly fund your trust once created, one should also review it regularly to title new assets to the trust.
Also Read: Who Can Change My Revocable Trust?
How Does Your Trust Address Asset Distribution?
Your trust should clearly outline how assets will be distributed after your death. Consider these questions:
- Are all beneficiaries accurately listed? If you have new children or grandchildren, they should be added.
- Does the trust specify age-based distributions? You might want to adjust the ages at which beneficiaries receive their inheritance based on their current maturity and level or financial responsibility.
- Do beneficiary designations for retirement accounts and life insurance policies align with those of the trust? Verify that the beneficiaries for these accounts coordinate with your current distribution preferences for the trust.
Have You Experienced Significant Health Changes?
Health changes, especially those involving long-term care, may require updates to your trust. If you or your spouse is likely to need nursing home care, it may be time to consider a Medicaid Asset Protection Trust to protect your assets from being used to pay for long-term care costs.
How Are Your Beneficiaries Protected?
Protecting your beneficiaries from creditors, divorce, or poor financial management is crucial. A revocable trust can be structured to provide ongoing protection for beneficiaries, ensuring that assets are not squandered or lost due to external factors.
Are Beneficiaries’ Needs Still the Same?
Your trust should reflect any new needs your beneficiaries might have, such as:
- Disability: If any of your beneficiaries are disabled and receiving government benefits, special needs provisions may need to be added to your trust.
- Financial Management Issues: If beneficiaries have developed issues with managing money, provisions can be added to protect them from their own financial mismanagement.
Read more about minor children beneficiaries in our article, Why You Shouldn’t Name Minors as Pay on Death Beneficiaries
Will the Pending Federal Estate Tax Changes Impact Your Estate?
One crucial reason to review your revocable trust is the upcoming changes to federal estate tax laws. The Tax Cuts and Jobs Act of 2017 significantly increased the federal estate tax exemption, allowing individuals to pass up to $13.61 million tax-free to their heirs in 2024. However, this exemption is set to change on January 1, 2026, when the exclusion amount will revert to $5 million, adjusted for inflation, likely landing between $6.5 and $7 million.
This reduction means that estates exceeding this lower threshold will be subject to federal estate taxes. Consulting with a Minneapolis estate planning attorney can help ensure your trust is structured to optimize these exemptions, allowing you to preserve more of your estate for your beneficiaries.
Also Read: What Are 7 Steps in the Estate Planning Process?
How to Get Started with a Trust Review
Consult with an Estate Planning Attorney
An estate planning attorney can provide invaluable assistance in reviewing and updating your trust. They can ensure that all documents meet legal requirements and reflect your current wishes accurately. Stone Arch Law Office in Minnesota specializes in helping clients with their estate planning needs.
Organize Your Documents
Make sure all your documents are organized and accessible. This includes not only your trust documents but also deeds, account statements, and insurance policies.
Schedule Regular Reviews
Plan to review your trust at least every three to five years or whenever significant life changes occur. This ensures your estate plan remains current and effective.
Conclusion
Regularly reviewing your revocable trust is crucial to ensure it aligns with your current life circumstances and legal requirements. By addressing these key aspects, you can ensure that your trust effectively protects your assets and honors your wishes. Book a call with our Minneapolis estate planning team to ask about reviewing your revocable trust.
