By Libby Banks, The Law Office of Libby Banks
I review many trusts, and some of them are quite old. After these old trusts were put in place, a lot of things have changed. For example, the federal estate tax exemption increased substantially in 2012, a new Arizona Trust Code was put in place in 2009, and most recently a new law affects those inheriting IRAs. Then, of course, the situation of the people who are included in the trust have often changed completely. When so much has changed, it’s clearly time to update the trust.
When we do an update, we usually do a complete amendment – called a restatement – of the trust. We keep the original trust name and date, and just note that it was restated as of the date we sign the new documents. That way, anything already titled to or transferred to the trust is still in the trust – we have no need to change the title on homes or bank accounts again.
Older trusts for a couple may require the surviving spouse to split the trust into two trusts on the death of the first spouse. This was standard estate tax planning before the increase in the federal tax exemption. It is unnecessarily complicated and most married couples don’t need this type of plan anymore. An update can simplify the estate plan for the surviving spouse.
Some of the plans I review still have guardians listed – but the children are now in their thirties with their own children. The trustees or executors may also no longer be the best choice, or even still alive.
The change in the Arizona Trust Code also gives us some easy ways to leave money in trust for our children. The advantage of the trust you leave for your children is protection of the trust money and assets in the event of divorce, and asset protection from creditors.
Leaving your children their inheritance in trust may protect the inheritance at their death as well. Let’s say your daughter inherits from you and puts everything in joint accounts. On her death, her husband will receive all of the inheritance because it is now joint property. And then, what if he remarries and doesn’t put a plan in place for those assets to go to your grandchildren? The assets may go to the new wife, and when she dies, to her children. With a trust, you can make sure it goes where you want it to – you can even benefit your daughter’s husband during his life if you daughter dies first, but be sure that ultimately your grandchildren receive the inheritance when their parents are both gone.
If your estate plan is more than a few years old, or you don’t have a plan, please contact us for our no charge consultation offered by videoconference or phone. Call us at 602-375-6752 or visit our website at LibbyBanks.com.