When it comes to preparing an estate plan, trusts can serve a variety of different purposes. Trusts offer flexibility, the ability to plan multiple generations into the future, and the opportunity to minimize tax liability now and in the future.
But, in order for a trust to serve its purpose, it needs to be structured and administered appropriately. Here are four common issues and some of the remedies that are available:
Issues and Possible Solutions with Estate Planning Trusts
Problem: You Don’t Have a Trust
First, let us be clear that this is not necessarily a problem for everyone. In many cases, using a trust simply will not be necessary (or cost-effective). However, if you have substantial assets, you have a high-paying job, or you have specific estate planning goals in mind, then incorporating trusts into your estate plan may be right for you.
Fix: Update (or Create) Your Estate Plan
If a trust is the best tool for your estate plan, then the fix is simple: Work with an estate planning attorney to put a trust in place. Of course, establishing a trust is not entirely straightforward – there are several types of trusts and several tax, legal, charitable, and family-related issues to consider – and you need to make sure your trust works with the rest of your estate plan as well.
Problem: Your Designated Trustee or a Named Beneficiary Has Died
Preparing an estate plan inherently involves planning for the future, and this means that unforeseen circumstances can impact your plan. One of the most common scenarios in which this issue arises is when a named trustee or beneficiary dies unexpectedly.
Fix: Appoint a New Trustee or Beneficiary (or Rely on Self-Executing Provisions in Your Trust)
Typically, a well-drafted set of trust documents will include provisions that name replacement trustees and beneficiaries specifically in contemplation of this scenario. But, if your trust is silent on the issue, you will need to work with your attorney to update your trust documents accordingly.
Problem: You Need to Access Assets You Placed into a Trust
This is another common scenario: You placed assets into a trust as part of your estate plan, and now changed circumstances mean that you need to access the assets for your own personal use.
Fix: Modify the Trust and Reconsider Your Estate Plan
Once again, this type of issue can (and generally should) be addressed proactively in the trust’s documentation – though there are limits on pulling assets out of various types of trusts. Before withdrawing trust assets, it is critical to make sure that you understand the restrictions and potential implications involved.
If you need to pull assets out of a trust, it is also important to consider how this will affect the distribution of your remaining estate: Will other assets need to be redistributed in order to ensure that each of your beneficiaries receives an appropriate share?
Problem: Estate Planning or Tax Laws Have Changed
Estate planning and tax laws change, and these changes can impact (and often substantially so) the implications of pre-existing estate plans. The current administration has suggested potentially significant changes to our current estate tax laws, and this is an area that all estate planning lawyers should be watching very closely.
Fix: Consult Your Professional Advisors
If you are concerned about how changes in the law could impact your estate plan, you should consult your professional advisors. Working with your estate planning attorney, accountant, and financial advisor, you can make any necessary modifications to ensure that your estate plan will continue to minimize your estate’s potential tax liability as much as possible.
Disclaimer: This Article Is Not Legal Advice.
Never rely on an article for legal advice as the law frequently changes, information may not be accurate, there may be exceptions to a rule, and reliance may be detrimental. Always consult one of our experienced attorneys for competent, current, and accurate legal advice.
Discuss Your Estate Plan with an Experienced Attorney
If you would like more information about the considerations involved in incorporating trusts into an estate plan, we encourage you to contact us for a confidential consultation. To speak with an experienced estate planning attorney at our offices in Wausau, WI, please call (715) 842-2291 or contact Crooks, Low & Connell, S.C. online today.