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.
About the Author
Jeffrey Broobin is a free-lance writer on family and finance
issues; his
main goal is to help people during their complicated period
of life, to find a
right legal solution in regards to family relationship.
