Trust a Trust?

Like a will, a trust needs to be updated when a life situation changes. A recent problem I came across for a client, Tom, was caused by a trust his parents had drawn up in the 1950’s. He was a child at the time. The trust stipulated that the trustees could decide if the child, who is a beneficiary, could take out more than the income it was creating each year. This was to preserve the trust and protect a young person from having too much money on his own.
The parents died twenty years ago and the money remains in this trust. He was grateful to have the added annual income and thought nothing of it, until now. Tom who is now a grandparent wants to take out a portion of the money to help his children buy houses and pay off his home. He is still tied to the trustees’ decision making process. This provision is silly for a grown man or woman who has managed their own money all their life.
So think about a simple life change: update your legal documents. Whether your children have grown up, the needs for a trust have changed, you have remarried or the laws have changed, these critical documents need to be reviewed every five years if not sooner. Be sure and spend the time, energy and money to update the documents as appropriate.
And for those adult children out there. Your parents may have had good intentions when you were a child. Now, after you update your own, you may want to remind your parents to update their estate planning documents. This will be for their peace of mind.
Plenty of people have entered my office complaining about trusts. I find the issue is not the document itself, but instead the details of the follow up. Be proactive so that you have a document you can trust.

Christine D. Moriarity, CFP