Do I Need to Review My Trust?

By: Jeffrey Roth

This article is for people who already have a revocable trust.  Now that the federal estate tax exemption is five million dollars and the Ohio Estate Tax has expired, people may say, “Why do I still need a trust?”   Others have not looked at their trust for ten years and have no idea what it states. The new exemption amount may eliminate federal estate tax but your old unrevised trust could cause you serious new problems.

Most trusts created within the last fifteen years are structured to take advantage of the federal estate tax exemption. Today, the standard A-B trust formulas can cause serious distribution problems at the first death. The surviving spouse may be required to create another trust at your death that is not necessary today. This is an expensive surprise that could be avoided with a review of the trust while you are both alive.

OTHER AREAS OF NECESSARY REVIEW:

• You are probably your own trustee but who is next in line? Many trusts only have the grantor as the trustee.  In a normal setting, I feel it is best to have both spouses as trustees of each other’s trust.  Each may act independently.  This allows your wife to handle the day-to-day business affairs of your trust account.
• If the trust was created a long time ago, you may have your brother or father as the successor trustee. This was done when your children were small.  Now that they are in their twenties, maybe they should be the successor trustees since they will inherit the assets anyway. Rules created for small children are no longer necessary. It may now be necessary to create provisions to protect the assets from the legal headaches of your children.
• There are many non-tax reasons to have a trust. Owning real estate in more than one county or state is a major reason for a trust. If the trust is the titleholder, then you will not need a probate administration in every state. People initially place the real estate into their trust but then buy more real estate in another state.  Once you have a trust you must continue to title the real estate and all other assets in the trust. Some individuals never do fund (place the title in the trust) their trust and any asset not properly titled will guarantee an expensive and time-consuming probate administration.
• Normally, each spouse has a trust. It is important to review what assets are in each trust. What was correct ten years ago might not be correct now. With age and health problems, it may be time to alter the trust ownership and place different assets into each trust. It may be time to remove an asset from the trust and re-title the asset to protect from nursing home liability. This was not considered when the trust was created years ago.
• You executed your trust in one state and now you are a resident of another.  Each state has its own rules and language. Your trust may be subject to the laws of your initial state of residency. This could cause a tax problem if you have changed residency to another state.  More importantly, special language required by a state to be in a trust could be missing in your trust. This is true with trusts created in Ohio and now subject to the laws of Florida.
• A simple review can easily solve the problems listed above. This is only a partial list.  Many individuals just simply leave their documents on the shelf and anticipate that all will be well. When you created the trust, you created a document that will totally control your assets and their distribution at your death. With the execution comes the responsibility to keep the document current and compliant with tax laws and your family’s station in life. A periodic review will make the final administration correct and easy for the surviving spouse and your children.

Jeff Roth is a partner with David Bacon and associate Jessica Moon of the firm ROTH and BACON with offices in Port Clinton, Upper Sandusky, Marion, Ohio and Fort Myers, Florida.  All members of the firm are licensed in the State of Florida.  Mr. Roth’s practice is limited to wealth strategy planning and elder law in both states.  Nothing in this article is intended for, nor should be relied upon as individual legal advice. The purpose of this article is to help educate the public on concepts of law as they pertain to estate and business planning.   If you have any questions you would like to have answered in this area of law, please direct your question to our offices at the listed information.

copyright @ Jeffrey P. Roth.