Generally speaking most people understand the need to have an Estate Plan put into place. Whether someone is affluent or has a simple estate, the benefits are huge. It is particularly important for those business owners to ensure the success of the business. However, we unfortunately find that people take the critical step to have their Living Trust and Ancillary Documents drafted, but then put the trust away and never look at it again. Living Trusts require review and updating to assure its Effectiveness and Accuracy. Why review/update?
1. Changes in the Law. We do our best to make our documents flexible enough to handle changes in the law. However, not all changes can accurately be accounted for and handled without an amendment from time to time.
2. Personal/Family Circumstances. Has your relationship with someone changed who is currently named in your Living Trust or Powers of Attorney. We even see that life changes so much that Guardianships and Successor Trustees often need to be changed due to family size, relationships, distances, etc.
Let’s use an example: In 2005, Mr. and Mrs. Smith created a Living Trust to protect their family of four. At that time, they were close friends with Mr. and Mrs. Johnson who have no children. They named Mr. and Mrs. Johnson as Co-Successor Trustees (people who will be in charge of distributing the estate upon death) of their Living Trust and also named them as Nomination of Guardianship – to raise and take care of their two small children.
Ten years passes and Mr. and Mrs. Smith have not looked at their Living Trust or Ancillary Documents. Currently, Mr. and Mrs. Johnson now have four of their own children and do not keep in touch with Mr. and Mrs. Smith. Mr. and Mrs. Johnson have moved out of state, and are now divorced. Can you see the trouble and issues brewing? If Mr. and Mrs. Smith were to become deceased:
- Mr. and Mrs. Johnson were named as Co-Successor Trustees – so they have to work together to manage and distribute the estate – yet they are no longer in the State and are no longer married. Problematic to be sure.
- Mr. and Mrs. Johnson were named as Guardians of the Smith’s two children – certainly problematic as the Johnsons are no longer married and also now have four of their own children.
There are additional issues, but this is just a taste of what can happen should someone neglect to review and update their Estate Planning documents.
3. Business. Has your business value changed such that there needs to be some additional planning or updating? Has the law or the economy changed that your Buy-Sell, in relation to your business and estate needs to be modified? Many business owners set an annual review to be sure they are accurately and effectively protected.
Here is the takeaway:
a. If you do not have any Estate Planning documents drafted by a licensed attorney, it is time to take that first critical step;
b. If you do have Estate Planning documents drafted, but have not had it reviewed recently, it is certainly time to do so – it is painless, but critical, to have it reviewed by a licensed attorney;
c. If you have a business, you might want to start setting up annual reviews with your estate planning attorney to be sure your business and documents are up to date and protect that which you are working so hard to build.
October 2015 by Donald W. Flaig, Esq.