You’ve taken the important step of creating an estate plan, including a trust—congratulations! This shows you care deeply about keeping your family out of court and conflict, ensuring your wishes are known and honored, and you do not want to leave behind a mess for the people you love. Great work. But you may not realize that an estate plan, a will, or a trust isn’t a “set it and forget it” type. Your estate plan is a living set of documents and tools that need regular attention to ensure they work when your loved ones need them and don’t fail at the worst possible moment.
Think about it this way: Would you still wear the same clothes you bought ten years ago without checking if they still fit? Probably not. Similarly, your estate plan, including your trust, must be reviewed regularly to ensure it still “fits” your current life situation, assets, the law, and wishes. Let’s explore why regular estate plan reviews are crucial and how often you should check in on your plan.
Life Changes and Your Trust Should, Too
Life rarely stays the same for long. Since you created your trust, you’ve likely experienced changes in your personal and financial life. Each of these changes can impact how effective your trust will be in protecting your assets and providing for your loved ones.
Consider significant life events like marriage, divorce, or the birth of children or grandchildren. These milestones fundamentally alter your family structure and potentially your wishes regarding who should benefit from your estate. For example, if you’ve recently welcomed a new grandchild, you should include them as a beneficiary. Or if you’ve gone through a divorce, you’ll likely want to remove your ex-spouse from your trust.
Your financial situation evolves as well. Perhaps you’ve purchased new property, started a business, or received an inheritance. These assets need to be appropriately incorporated into your trust. Otherwise, they may go through probate, defeating one of the primary purposes of having a trust in the first place.
Even changes in your relationships can necessitate updates to your trust. The person you appointed as a successor trustee five years ago might no longer be the best choice. Without regular reviews, your trust may not accomplish what you intend, potentially leading to conflict among your loved ones or assets being distributed in ways you never would have wanted.
Laws Change, Even When Your Wishes Don’t
Even if your situation has remained relatively stable, the legal and tax landscape constantly evolves. These changes can significantly impact how your trust operates and its effectiveness in protecting your assets.
Tax laws, in particular, frequently change with new administrations and shifting political priorities. For instance, the Tax Cuts and Jobs Act of 2017 doubled the federal estate tax exemption, dramatically changing estate planning considerations for many families. If your trust was created before this change, it might contain no longer necessary or beneficial provisions under current law.
State laws governing trusts and estates also change regularly. These modifications can affect everything from how your trust is administered to the rights of beneficiaries. Without regular reviews, your trust might not take advantage of beneficial new laws or run afoul of new requirements.
By reviewing your trust periodically, you can ensure it remains compliant with current laws and takes advantage of any new beneficial provisions. This proactive approach helps protect your assets and your loved ones from unexpected legal complications.
How Often Should You Review Your Trust?
Given the importance of updating your trust, you might wonder how frequently you should review it. While there’s no one-size-fits-all answer, some general guidelines can help you determine the proper schedule for your situation.
Review your trust every three to five years as a baseline, even if you don’t think anything significant has changed. This regular schedule helps ensure you don’t overlook gradual changes that might have occurred in your life, your assets, or the law.
However, certain life events should trigger an immediate review, regardless of when you last updated your trust:
- Marriage, divorce, or the death of a spouse
- Birth or adoption of children or grandchildren
- Death of a named trustee, guardian, or beneficiary
- Significant changes in your financial situation
- Moving to a new state, as trust laws vary by state
- Substantial changes in tax or estate planning laws
The Consequences of an Outdated Trust Can Be Severe
Failing to review and update your trust regularly can lead to serious consequences that undermine your initial reasons for creating it. These consequences can range from financial losses to family conflicts that proper planning could have avoided.
One of the most significant risks is that assets you’ve acquired since creating your trust may not be adequately funded into it. Trust funding—the process of transferring assets into your trust’s ownership—is crucial for avoiding probate. If you’ve purchased new property, opened new accounts, or acquired valuable assets without transferring them to your trust, these items will likely go through probate despite your efforts to avoid it.
An outdated trust can also result in unintended beneficiaries receiving your assets. If you haven’t updated your trust after significant life changes, your assets might go to people you no longer wish to benefit—or might not go to those you do want to include.
Family conflict is another potential consequence of an outdated trust. Unclear or outdated provisions can leave your loved ones arguing over what you intended. These disputes can damage family relationships and lead to expensive, time-consuming litigation.
Tax consequences can also arise from an outdated trust. Changes in tax laws might mean your trust no longer effectively minimizes estate taxes. Without updates to address these changes, your beneficiaries might face larger tax bills than necessary, reducing their inheritance.
Finally, reviewing your trust doesn’t always mean you must make changes. Sometimes, you’ll find that your current trust still perfectly reflects your wishes and circumstances. Even then, the review process is valuable for refreshing your understanding of your plan and giving you peace of mind.
Don’t Leave Your Family’s Future to Chance
Your trust is more than just a legal document—it reflects your care for your loved ones and your desire to provide for them even when you’re no longer here. By reviewing your trust regularly, you demonstrate that same care and foresight. You also save your loved ones from confusion, conflict, and costly legal proceedings during a difficult time.
I’m here to support you in this ongoing process. Reviewing legal documents isn’t high on anyone’s list of favorite activities. Still, I work to make the process as simple and painless as possible and build it into my ongoing service once we work together. Don’t leave your family’s future to chance. Schedule a plan review with me today and ensure your created plan will work exactly as you intend when your loved ones need it most.
Contact us today to get started.
This article is a service of August Law, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life & Legacy Planning™ Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love.
The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.