When Is It Time To Update Your Trust

//When Is It Time To Update Your Trust

When Is It Time To Update Your Trust

When did you create your living trust? Do you need to just make minor changes to your trust, or is a full scale replacement of your documents in order? Here are some signs it might be more cost effective to simply replace your documents rather than make amendments.

When your trust was created:

  • No one knew what a “hanging chad” was
  • Cell phones were bigger than a Starbucks Grande coffee
  • People were proud of their VHS movie collection
  • Voicemail? What the heck is voicemail?
  • People were still driving Datsuns and not Nissans
  • The new video game everyone was obsessed with was Tetris
  • Jurassic Park was in theaters
  • Who is Harry Potter?

 

A revocable living trust is like a good, dependable car. It gets you where you want to go, it needs some maintenance, but eventually you have to replace it with something new and up to date.

I recently had two couples contact me about making changes to their trusts. In both cases, changes had to be made to every document, there had been at least 10 major estate tax law changes, and their documents pre-dated my tenure as a lawyer… and I have been an attorney for 18 years now. The fact is updating much older documents that may have been extremely good at the time is now probably more expensive than simply replacing the documents with current ones.

Here are some reasons why:

  • Before even getting started on any changes, an attorney would have to review not only your old documents but the new standard documents to compare them. Then they would have to note what are critical changes, what are recommended changes, and what can be left alone, and then discuss what changes you wanted.
  • In many cases, a minimum of five or six hours of work may be needed to provide a thorough analysis costing more than a thousand dollars to analyze things before an attorney may even get started on making any changes.
  • The most common way of charging for amendments and changes to a plan is hiring an attorney by the hour. So after charging to analyze the numerous changes and discussing them with the client, every minute the attorney is working costs money, and depending on the changes desired and the changes that should be made because of changed laws, this could be on the relatively high end as much as 15 or 20 hours just to draft amendments to existing documents. 20 hours of work at between $200 and $300 per hour would translate into $4,000 to $6,000 on top of the money for analyzing the documents.
  • Another downside is that people who pay by the hour don’t ask important questions because they don’t want to add to the bill, so they tend to come away from the process not really understanding what they have, how it works, and they feel like they paid too much. In addition, it actually takes a lot more of an attorney’s time to handle by the hour changes because very little work can be delegated to non-attorney staff, and the attorney has to take the extra step of stopping and starting the clock every time they are interrupted.

 

In these cases, it is often easier, less costly, and more collaborative to start the planning fresh as if there were no living trust in place. In our office the way we work with new clients in an Estate Strategy Session can also be a good exercise for people who have a living trust to see exactly what is wanted and then these goals can be matched against the documents you have.

So what exactly is the “cut off date?” Certainly anything older than 2001 or 2002 is likely to have some extremely out of date tax provisions, and the documents we used prior to 2007 have many changes in the “recommended” change category, which means it really should be changed but may not be considered “critical” for your situation. So you may want to take a look at signing date of your trust and ask yourself what kind of cell phone did you have at the time? If you start laughing, it might be time to upgrade your trust.

By | 2017-05-20T16:43:29+00:00 February 19th, 2014|Legal Info|0 Comments

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