When to Review Your Living Trust

First, if you’ve taken the time to set up your living trust, congratulations. You’ve done a huge service to yourself and your family by going where so many people fail to go. But before you break out the champagne, keep in mind that your job isn’t complete.

You’ve got to review your trust from time to time and make changes to the document. Over the course of several years, your situation may change, and those changes may warrant a living trust or family trust update.

What are some of those life-changing events?

1. Kids

If you have more children, or your children start giving you grandchildren, it’s time to review your trust. And even if your family doesn’t expand that much, your children and grandchildren will get older. Usually the trust treats trustees differently once they reach the age of 18. And as the kids come of age you get to know them better. As a result, you might want to change the distributions as called for in the trust.

Let’s say one of your kids just launched a “Google” and has more money than the U.S. mint. She (and her children) may no longer need to inherit money from your trust. Better update the document…right?

On the other hand, sometimes putting more money in the hands of our loved ones only allows them to continue self-destructive behaviors. When you are clear on that, you’ll do yourself and your children a huge favor by restricting their access to your trust assets. In this case, you might want to consider an irrevocable life insurance trust instead.

2. Health

While most living trusts make allowances for your disability, it’s just a good idea to update your trust (or at least call your attorney) if one of the trustees has become seriously (and possibly irreparably) ill.

3. Real Estate

When you buy or sell property, you don’t necessarily have to update your trust. Just make sure you hold title properly. Every now and then I see clients obtain new property and forget to put it in the name of the trust. Please don’t make this mistake.

And that goes for refinancing too. When you refinance your loan, the lender usually wants you to do so outside of the trust. (At least that’s how it works in California.) Just remember to put the house back into the name of the trust once your refinance is complete.

4. Time

I recommend that people review their living trust every three to five years even if they think nothing has changed. The reason? Laws change all the time. One aspect of law that changes all the time is related to the health power of attorney.

I met a client who carried his health power of attorney documents around with him everywhere he went. I was really impressed by this client. But then I learned that his health power of attorney was created back in 1999.

Having a document that old was possibly worse than not having a health power of attorney at all. I say that because the document my client had was not in compliance with current law and it also conflicted with his current wishes.

In summary, if you care enough about your finances to read this blog and others, care enough to stay current. There are lots of triggers that should get you in to see your attorney. Do yourself a favor and call your lawyer every three to five years to see if you need to update your trust. You may also want to redo your trust entirely. If that’s the case, read my review of Legal Zoom.

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