Why & When To Review A Living Trust


Simple Prudence Dictates Periodic Reviews of Your Estate Plan:

Because life, laws, holdings, and circumstances often change, time erodes and “detunes” the best estate plan (regardless of whether it is a trust, will, or other alternate method). Thus prudence dictates an ongoing strategy of revisiting these matters as we survive long enough to outdate our estate plan. How often that is depends upon changes in the law and changes in your life, wishes, circumstances, and holdings. Experienced professionals advise a review every three years but the given pace of events and/or change of circumstances can accelerate or decelerate the need. Yet, since we can’t track each client’s life or predict future law changes, we therefore advise following the three-year rule of thumb (or sooner if there is a major change in circumstances). Unfortunately, some view this as a ploy to generate business, but such is not the case. This is reasonable and prudent advice you would receive from any experienced estate planning professional looking out for your best interests. The decision is ultimately yours but our advice remains the same. The need to revisit and review your estate plan is a price of survivorship (a tradeoff most of us would gladly make). The potential cost and trouble of being caught with an outdated estate plan far exceed the cost of any review – and it is only you, or your spouse and your family, that will pay the ultimate price of a stale or outdated estate plan.

Drastically Increased Estate Tax Exemption:

As the law stands today each U.S. person can pass $5+ Million completely estate and gift tax free (and a U.S. Citizen surviving spouse up to $10+ Million estate tax-free). Because of these changes in the law, what was good strategy when you completed your trust, may no longer be so – and this is especially true regarding the long used AB trust format for married couples (see below). The cost of an update and review are nothing when compared to saving you from a structure you probably no longer want or need. Regardless of the increased exemption or the outdating of the AB trust format you still need a living trust to avoid probate yet with portability spouses can safely do what most of them have been telling us they want to do for years: leave their estates outright to each other (rather than in the burdensome AB format)!

The Lingering Legacy & Problems of Continuing With or Electing an AB Trust Format:


It has long been a standard practice at many law offices for married couples to sign up for the AB trust approach as a way to insure the use of both spouses’ exemptions. Under new current law however an AB trust 1) no longer buys any estate tax advantage, 2) needlessly risks losing major income tax benefits and 3) will still burden the surviving spouse with significant restrictions, tax filings, irrevocability, accountability, and other legal responsibilities for life. That is why if you have a married living trust it is very important to review it for this issue or there is a strong possibility you or your surviving spouse may be stuck with burdensome restrictions you no longer want or need – and worse yet will do you no tax good at all! No one can speak better to this issue than the countless surviving spouses we have met with over the years who seem to universally dislike and regret being saddled with the requirements of the AB format.

New Portability Law Simplifies Planning Between Spouses:

Prior to 2011 only the issue of estate taxes – more specifically the possible need to utilize both spouses’ estate tax exemptions introduced complications to the otherwise straightforward wish of most married couples for the surviving spouse to inherit all assets at the first spouse’s death. In other words most couples only agreed to the AB structure as an advised tax strategy and otherwise had no desire to burden and restrict the surviving spouse. Hopefully the need for such complications is now a thing of the past because current law now allows portability of the exemption between spouses. Under portability the surviving spouse is now allowed the straightforward use of both (husband’s and wife’s) exemptions without the need for any special (AB) sub-trust planning and its accompanying red tape.

Click here to learn more about why most married couples no longer want or need the AB trust format!

Current & Improved Legal Language, Drafting, Flow, Layout, and Package:

Legal wording, concepts, laws, and techniques are in a state of constant evolution. As these changes occur there is an ongoing effort on our part to continually update, refine and improve upon our package to reflect the most current laws, findings, and optimal techniques. Over time we do make changes and improvements to our system and our trust package. Though many of these changes may be subtle and small, they add up over time, and do make a difference. It is important that your trust not be too dated in these regards. In addition to more current language, the layout, flow, and readability of the trust has improved significantly over time.

Newly Advanced Health Care Directives & Medical Decision Law:

Early on we began providing Cal. Medical Association “Durable Power of Attorney for Health Care” forms as part of our package. (Giving you the ability to appoint someone to make health care decisions for you if you were unable.) The early forms (prior to around 1993) expired after only 7 years — and the forms before August of 2000 fail to reflect the latest laws. That’s because the California legislature enacted a major overhaul of this law effective as of August 2000. Though the new law did not invalidate earlier forms the new forms add significant force and clarification provided by the new laws. Therefore, any form prior to August 2000 fails to encompass important new safeguards and powers embodied by the new law. Also, see Advanced Health Directives

New or Refinanced Real Estate Property Not Titled In Trust (or Removed From the Trust):

For varying reasons we often find real property that is not titled in the trust – and such is likely to cause huge problems. This includes newly purchased properties, refinanced properties removed from the trust (often occurring in escrow without the client really understanding such has happened), adding others to title (usually a poor idea and for the wrong reasons), or reverting to joint tenancy.  Such actions either guarantee a trip through probate or, in the case of joint tenancy, usually a result in the long-term loss of a huge tax advantage. Catching these issues alone are worth the price of any review. Also, some of you have silent (unrecorded) deeds (which many of you requested). While silent deeds are perfectly legal and acceptable we find many clients ultimately become confused or uncomfortable with unrecorded deeds (thinking that the property is not in the trust when in fact it is). Reviewing matters allows us to either clarify and correct such matters or facilitate recording of the deeds to make you more comfortable. Additionally, see our New & Refinanced Property.

Other Assets Not Titled in Trust:

During your trust process we emphasized the vital importance of and your responsibility of making sure that all of your assets (except Qualified Retirement Plans) were properly titled in the name of your trust (present and future assets). This was stressed to you both orally and in written instructions. Despite heavy emphasis on this subject we are still finding instances where clients fail to follow through on this instruction. Be aware that owning real estate outside the trust is not the only thing that can trigger probate. Enough other kinds of assets outside the trust will trigger probate all by itself too. Even below such probate triggering levels, the paperwork and process necessary to gain control of such assets is still considerably more work than if the assets were properly titled in the trust. To learn more, please see The Importance of Titling Assets in Your Trust.

Prior Planning and Inheritance Provisions That No Longer Apply to Your Circumstances:

Children mature and get older, good kids become bad, bad kids become good, nominated successor trustees die or move away, children, trustees, or beneficiaries develop problems or disabilities, names change – on and on the list goes. Point being, things change that make previous planning or strategies inapplicable or inappropriate. A particularly glaring example and problem area is specific gifts (i.e “the Main Street house to John” or “the Bank of America account to Mary”). The trouble with specific gifts is that the asset is no longer owned at the time the person finally passes away. (i.e the house that John was supposed to get was sold years before and the bank account for Mary was dissolved long ago). This can cause enormous complications and bickering. We know that people seldom think to link the sale or shifting of an asset (or their net worth) with what is in their estate plan – which is why we have always discouraged specific gifts. Nonetheless, many clients insist. We know from experience that the gifting strategies in many clients’ estate plans can quickly become outdated and headed for problems because they are out of date.

Excluded Heirs:

Largely or completely excluding children from inheriting an equal share of your estate invites potential challenges and conflict at death. Though never legally required, we now go to greater lengths to document any intent to exclude family members. While nothing can be done that legally prevents a contest this strategy helps to discourage and forestall them. If you have excluded family members it would be a highly preventative move to come in for a review to further document your intent.

Double Check & Quality Control:

We are all human beings. There is always a possibility that an oversight, mistake, omission, misinterpretation, or misunderstanding could have occurred in the preparation of your trust and related documents. Reviews serve as a double check and quality control measure.

Divorce, Marriage, Death:

If you have become divorced or remarried this can vastly affect your estate plan and trust – even invalidate it. Any change in marital status necessitates revisiting and restating your estate plan. If you have not sought estate planning legal advice and guidance since divorce or remarriage it is essential that you do so immediately. Finally, whenever anyone dies it is very important that legal and tax guidance be sought immediately afterwards. (see Important Issues When Someone Dies)