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Review Your Estate Plan

I met with a nice couple yesterday who had a revocable living trust set up about 15 years ago by a well respected local estate planning attorney. I know the attorney and think she is perfectly capable at her job. No, she is not as good as me but… she’s perfectly acceptable.  I reviewed the trust and, simply put, it was not acceptable based on this couple’s estate size; in fact, there could be a huge tax at death with this trust.  I wondered if the previous attorney had just made a mistake and drafted the wrong trust.  I then asked the clients if their assets had changed since they had the trust drawn up originally.  They said that indeed their assets had changed considerably as one of their parents had died and left them about a million dollars.

I was happy to know that because it showed that the other attorney had not done anything wrong which was good.  The former attorney had done a basic probate avoidance, or completly revocable, trust. At the time of drafting this would have been approrpriate for a husband and wife with less than $500,000 in total assets.  I was confused since this couple had somewhere between $1.5m and $2.0m.  The former attorney did nothing wrong as I am sure she told the clients to contact her if things ever changed drastically and they probably forgot.  Failing to review your own trust can be costly!

It’s good the clients are dealing with this now as we can get it fixed up with a more appropriate trust by doing a “restatement of trust.” This is simply new trust text but it will retain the old trust name and original trust date. That way the clients will not have to re-title any assets.  A restatement of trust is really our best weapon in fixing old out-dated trusts as it’s much less costly than a brand new trust where we also are re-titling assets.

If the clients had died after December 31, 2012, with the current tax laws, their kids could have been looking at a $500,000+ estate tax bill under the current estate tax laws. By us doing the new restatement of trust they will pay ZERO!  I think it’s lucky this client came in to review things!

Contact me if your trust needs a review!

-John

Ratings and Reviews

10.0John Bernard Palley
Wealth Counsel Member
2015 Best of the Best Badge