Published: Fall 1996 in Feature Story

Update Your Estate Plan

by Lynn P. Hart ’76, Esquire
Cowley & Chidester
Rancho Santa Fe, California

As the new year begins, many people resolve to put their financial affairs in order. What should they keep in mind when reviewing their estate plans?

I suggest considering five different areas:.

1. Will/Trust Update

How long has it been since you executed or updated your will or revocable trust? Estate planners recommend that you review your estate plan every three to five years, or more frequently if you experience significant changes in your financial or familial circumstances.

2. Consider a Revocable Trust

If you have not already established one, consider whether you should create a revocable trust, sometimes called a “living trust.” You, as “grantor,” create this trust during your lifetime for your own benefit, and you can amend it at any time up to your death. Such a trust is sometimes described as a “will substitute.” While the grantor of a revocable trust should also have a will that coordinates with the trust, the trust will contain the most important provisions of the grantor’s estate plan.

It is important to understand the potential benefits of a revocable trust—and its limitations. The trust is a management and administrative vehicle that offers a primary benefit: assets held in the trust at a grantor’s death avoid probate. Once a grantor’s assets are transferred to a trust, a conservatorship over the grantor’s assets is unnecessary if the grantor becomes incapacitated. Assets held in a revocable trust do not, however, avoid estate tax at death. Because the grantor retains so much control, the trust’s assets are fully includable in the grantor’s estate at death. In fact, a well-drafted will may offer the same estate-tax benefits as a revocable trust. But the trust can be a beneficial tool under the proper circumstances. Consult your attorney to see if a revocable trust is appropriate for you.

3. Funding Your Trust

A revocable trust is effective in avoiding probate or a conservatorship only to the extent it is funded. Funding the trust involves transferring legal title to the grantor’s assets to the trustee of the trust. Even when the grantor serves as trustee, as is usually the case, legal title must be taken in the grantor’s capacity as trustee of the trust. If you have previously created a revocable trust, review the title to your assets to ensure they have been properly transferred to the trust.

4. Review Beneficiary Designations

Be sure to review the designated beneficiaries of retirement assets and insurance policies. Many people do not realize that wills (or revocable trusts) generally do not govern the disposition of such assets, which typically pass directly to the named beneficiary. A carefully drawn estate plan can be thwarted when beneficiary designations are not properly coordinated.

5. Durable Powers of Attorney

Durable powers of attorney are part of any complete estate plan. These documents authorize a designated agent (often a spouse or child) to make health or financial decisions on behalf of the person executing the power (the principal.) The power can be designed to confer that authority on the agent only if the principal becomes incapacitated. If you executed a Durable Power of Attorney for Health Care prior to 1992, that power typically will expire seven years from the date of execution. Verify that the power is current.

Request a free copy of “A Guide to Planning Your Will” by calling (805) 565-6034.

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