Amending your Trust – Your Living Trust is executed with certain formalities and can be changed or revoked only by using similar procedures. You should contact your attorney if you wish to insert something or make a change. A note in the margin of your Trust, or a striking out of words, even next to your signature, is ineffective. I cannot overemphasize the need to follow the proper steps for amending a Living Trust.
Keeping the Trust Funded – Although executing your Living Trust provides you with an orderly disposition of your estate, you will not avoid probate unless and until the Trust obtains legal title to your property. This procedure is called “funding” the trust.
Life insurance – Most often your Living Trust should be the beneficiary of your life insurance policies. The proceeds from insurance policies should go into the trust so that they will be directed by a trustee according to your estate plan, and provide the trustee with funds to administer your estate. Insurance policies not owned by you should generally not be made payable to your trust.
Retirement Accounts – Individual retirement accounts (IRA’s) and 401K’s are tricky, and beneficiary designations should be handled by your attorney or financial advisor. Most often, the surviving spouse or adult children are your beneficiaries, but sometimes your Living Trust will make the best beneficiary, especially if your heirs have unusual circumstances or special needs.
Real Estate – To transfer your real property to the trust, you should have executed “trust transfer deeds” or similar deeds showing the property transferred to your Living Trust. This is probably the most important part of funding your trust. There will be no reassessment of California property under Proposition 13 as a result of this transfer. It is important to note that if you ever mortgage your property, or refinance an existing mortgage, some banks and financial companies will remove the property being refinanced from your Trust as part of the refinance process. If this occurs, it is very important that your property be transferred back into the trust after the refinance is completed. We also recommend naming your living trust as an additional insured on your homeowner’s insurance policy, and on the policies for any other real property you own or acquire in the future.
Stock and Mutual Funds – Your stocks, bonds and mutual funds should be owned by your Living Trust, except for IRA, 401K and other tax-deferred retirement accounts. We recommend using a brokerage account owned by your Trust to hold your individual stocks.
Tax Returns – Your Revocable Living Trust need not file a tax return. Because you are the owner of all property in the trust, you will continue to report all trust income as though it were your own. These rules eliminate the need to obtain a tax identification number for the trust as long as you remain a trustee of your own trust. You may give your own social security number when opening accounts in the name of the trust.
Safe Deposit Boxes – If you have a safe deposit box, it may be very difficult for your trustees or beneficiaries to access its contents. I recommend adding the names of you’re the successor trustees of your Living Trust to any safe deposit box so that they will have access upon your death or incapacity.
Trust Exhibits – All Living Trusts should include a schedule of trust assets. Some Trusts,including those prepared by our office, may include schedules of non-trust assets (such as IRA accounts) and special gifts. It is critical that you keep your Exhibits up to date!
The laws associated with trusts and estates are very complex and constantly changing, as is the need for ongoing financial and tax planning. In addition, your needs and wishes will change over time. Your attorney will not normally initiate future contact with you. You should review your documents regularly to be sure that your beneficiaries, assets and agents (including your successor trustees, executors and health care agents) are still correct and appropriate. If you are concerned about any personal or legal changes that may affect your estate plan, please contact your attorney!
Over time changes may be required in your estate plan due to many factors. A list of the primary factors and changes that may require a review of your estate plan includes:
1. Changes in Family Relations
a. Divorce or separation
c. Marriage of a single person
d. Changes regarding child or grandchild (or other beneficiary)
(1) Birth of a child
(2) Death of a child
(3) Marriage of a child
(4) Divorce of a child
(5) Adoption of a child
(6) Illness of a child (serious or fatal)
(7) Economic change, whether good or bad
(8) Attitude change toward beneficiaries
(9) Financial irresponsibility
2. Changes in Economic and Personal Condition
a. Large asset value changes, whether an increase or a decrease
b. Change in insurability or life insurance
c. Change in employment
d. Change in business interests, new partnerships or corporations
e. Property acquired in a different state
f. Deterioration in health of client or spouse g. Retirement from business or profession
3. External Changes
a. Changes in laws: state and federal income, estate and gift, property, trusts,probate
b. Change of residence to different state
c. Death of executor, trustee, or guardian
d. Change of relationship with executor, trustee, or guardian