At least one trust agreement is frequently included in a comprehensive estate plan. After taking the time to consult with an attorney and think through the provisions of the trust agreement, however, people often forget about their trust. Failing to update a trust can decrease the trust’s effectiveness or cause it to fail entirely. With that in mind, the Grand Forks trust attorneys at German Law explain when you might need to update your trust agreement.
- Marriage. When you marry, you will likely want to include your new spouse in your overall estate plan. That may include changing the beneficiary designations as well as changing fiduciary positions within your plan. Specifically, you may decide to add your new spouse as a beneficiary to an existing trust agreement and/or appoint your spouse as the Trustee of a trust. The marriage of an adult child is also something that could trigger a review because your son/daughter-in-law now has a potential legal interest in any assets that are to be distributed to your child according to the terms of the trust.
- Divorce. Not surprisingly, divorce should also trigger a review of an existing trust agreement. One of the most common mistakes people make is forgetting to make changes to their estate plans after a divorce. Failing to update your plan after your divorce could leave your ex-spouse in charge of administering a trust and/or as the beneficiary of a trust.
- Birth and death. The death of anyone who is a beneficiary of a trust or who is a Trustee or successor Trustee should cause an update of your plan. The name of a recently born child or grandchild who may be a beneficiary should also be included in an existing trust agreement, even if you already have a general provision directing distributions to “children” or “grandchildren.
- When your children reach adulthood. As the parent of minor children, you had to protect your children’s inheritance because they could not inherit directly from your estate; however, when your children become legal adults, you have the option to gift directly to them. That, in turn, may require revisions to an existing trust agreement.
- Changes to trust assets. Minor changes should be accounted for within the trust agreement; however, if you have added or removed significant assets or the value of trust assets has changed dramatically, you may need to revise the trust agreement.
- Retirement. You may start withdrawing funds from retirement accounts and selling major assets when you retire. This alone may impact an existing trust. In addition, if you have not yet considered the addition of a Medicaid planning component to your estate plan, now is the time to do so. As part of that plan, you may need to add a Medicaid trust to your estate plan.
- Serious illness. Many clients include a revocable trust as part of their overall incapacity planning component within their estate plan. If you are diagnosed with a serious illness, however, you should review that trust to make sure everything remains applicable and current.
- Change in the law. Sometimes, changes in the law impact a trust agreement. For example, not all states recognize all types of asset protection trusts.
- Move to a new state or country. Most aspects of trust administration are governed by state law within the United States. If you move to a new state (and certainly if you move outside of the country) you should review an existing trust agreement to make sure it complies with the applicable laws.
Contact a Grand Forks Trust Attorney
Please join us for an upcoming FREE seminar. If you have additional questions about updating a trust agreement, contact a Grand Forks trust attorney at German Law by calling 701-738-0060 to schedule an appointment.
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