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What’s New With Your Living Trust?
By
Jeffrey Broobin
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Some time ago, Congress made
certain changes to the estate taxes. As a result of the
changes, effective January, 2004, the tax free amount
increased to $1,500,000. (Back in 1997 it was $600,000.)
This allows a married couple to leave a minimum of
$3,000,000 tax free.
Your Living Trust does not need to be changed to
incorporate these changes.
However, there are other developments which might be
appropriate to consider.
1) You might want to consider a Dynasty Living Trust. The
advantage of using the generation skipping tax exemption
is greater during the grantor’s lifetime. Once property
is transferred to a dynasty Living Trust, all appreciation
and accumulated income generated by the property until the
grantor’s death will be exempt from estate tax as long
as it remains in the Living Trust. Basically, this is a
grown-up Minor's Living Trust.
2) Another more recent development is worth considering.
Since after one spouse dies, the Survivor has full control
of the Surviving Spouse's Living Trust, including the
right to change the beneficiary (through the General Power
of Appointment), it is important to insure that the
children from the first marriage inherit their deserved
portion.
This is what could happen. You die. Your Living Trust
divides into two or three shares. Your wife, who has
control of the Living Trust, spends your half of the
estate, remarries, and leaves her half to the new spouse
(not your intention). You may discuss this now with your
spouse and decide that the assets you have acquired during
your lifetime together belong to both of you. While you
still want your spouse to be happy and maybe even remarry,
you want your joint assets to be inherited by your
children, not the new spouse.
It is possible with the standard A - B - C Living Trust
held by most married couples, which allows the Survivor's
half (the A Living Trust) to be changed, to incorporate an
instruction that the A Living Trust (the Survivor’s
half) will be locked. With this feature, the surviving
spouse may spend everything, but whatever is not spent
must be left to your family rather than the new spouse.
3) Because time has passed since your Living Trust was
first written, formerly young children are not so young
anymore, and the successors you selected to make your
decisions may no longer be appropriate because they are
too old. Please review these designations listed in your
Living Trust and Powers of Attorney (financial and Health
Care).
Furthermore, the inheritance age threshold designated for
minor children at the time you made your Living Trust may
no longer be appropriate. At the time, you were guessing
about what these minors would be like, say, when they
became 25 years old. Maybe you now think it is necessary
to adjust that age restriction.
4) Be certain that the people you appointed still have
their copies of your Health Care Power of Attorney. They
should have a copy handy because in an emergency they may
need to make medical decisions quickly.
5) Make it easy for the people you Living Trusted to deal
with your financial matters.
1.Make sure they know where to find your advisors.
2.If you have your own business, make a plan to deal with
your death, beginning with the first day after your death.
3.Make a list of investments (name of institution, account
numbers) so your assets can be found. (Bank / stock
accounts, retirement plans, life insurance, safe deposit
box, etc.)
4.If all the information is in your computer, make sure
that an appropriate Living Trustworthy person has access
to the password.
6) Make sure that your assets which have any form of
registration are properly titled in your Living Trust.
These assets include bank accounts, stock, and real
estate. Now is a good time to verify that all such assets
are held properly.
You also will receive Forms 1099 showing interest or
dividends received during the past year, and K-1s for
Partnerships. Check each real property tax bill, Form
1099, and K-1 to ensure that it reads something along the
lines of:
John and Mary Doe, Trustees of the Living Trust of John
and Mary Doe, dated January 1, 2004.
There may be other property which should also be in the
Living Trust but may not provide annual reporting, such as
stock which does not pay dividends and, therefore, no 1099
is provided. You should also verify that Pension Plans,
IRAs, and Life Insurance beneficiaries are properly
designated.
Creditors (such as your mortgage holder and credit cards)
do not need to know about the Living Trust. Only those
holding your property should have notice.
If you inherited any property or received a substantial
gift since formation of the Living Trust, you should
consider its status and your plans for it. Likewise, the
ramifications of a change in your marital status since
formation of the Living Trust should be considered.
If you refinanced your property since doing the Living
Trust, bought new property, or opened new investment
accounts, you should verify that the property is back in
the Living Trust. As a good idea to remove all uncertainty
with regard to the current and up-to-date nature of the
information in your Living Trust, you might want to sign a
statement each year informing that all personal property
is listed in the Living Trust.
Also, review your estate plan yearly to make sure that you
still trust the people you have chosen to act on your
behalf after your death.
Note that Legal Helper Corp. - http://www.legalhelpmate.com/living-trust-online.aspx
- provides an easy-to-use, quick, and economical online
method for creating completed revocable living trust.
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