A Greek philosopher once said the only constant in life is change. When many estate plans are first created, children are minors, marriages are new and retirement is far in the future. A recent article from Forbes, “Dynamic Estate Planning: Creating Plans That Evolve With Life’s Uncertainties,” reminds us that tax laws change, marriages end and children grow up to have children of their own.
To ensure that your estate plan accurately reflects your life, it needs to incorporate built-in flexibility, which is best achieved with the assistance of an experienced estate planning attorney. To create a flexible estate plan, discuss these tools when creating or updating a plan:
Revocable Living Trusts work during life and after death. They allow for control of assets in the event of incapacity and can be easily modified as circumstances change. In the event of incapacity, the successor trustee may access funds and use them to maintain the family’s lifestyle without needing to petition the court for a conservatorship.
Don’t fund a Revocable Living Trust with assets having beneficiary designations. Accounts with beneficiary designations typically include retirement accounts, life insurance, transfer-on-death bank accounts and jointly owned assets.
It’s a good idea to create an inventory of assets with beneficiary designations and review those names periodically to ensure that they still accurately reflect your wishes. Many an ex-spouse has received a surprise when their name was not removed from hefty IRAs and life insurance policies.
Trusts offer great flexibility. With discretionary distribution provisions, the trustee is empowered to make distributions according to the changing needs of the beneficiaries. The grantor (the person creating the trust) can include a “trust protector” provision to give another person the power to modify terms of the trust without court involvement.
Depending upon what state you live in, you may be able to give a trustee the ability to “decant” a trust: to move assets from one trust to another. Your estate planning attorney will know whether your state allows decanting.
Provisions granting beneficiaries limited powers of appointment allow them to redirect trust assets among their own descendants, providing flexibility while maintaining some level of control over the ultimate beneficiaries.
Estate planning is not a one-and-done process, so even a flexible estate plan requires a review every few years. However, by starting with a flexible estate plan, it will more easily evolve along with the changes brought by life and legislation.
Legacy One Law Firm, APLC is an estate planning and probate administration law firm in Los Angeles, California, serving families throughout the State. Schedule a quick and easy consultation with our estate planning attorney, Sedric E. Collins, Esq., or call 323-900-5450.
