When to Update a Living Trust

A living trust is a crucial estate planning tool. Not only can this vehicle transfer your property to loved ones when you pass away, but it can also be used to manage your assets while you are alive. Importantly, living trusts are revocable — this means that you can make changes to the instrument at any time. It’s critical to review a living trust at regular intervals, or when major life events occur, to ensure the provisions in the document still reflect your wishes.

What is a Living Trust?

Also referred to as a “revocable trust,” a living trust is a legal arrangement that allows you to transfer ownership of your assets into the trust, while still retaining control over them during your lifetime. Typically, when you establish a living trust, you name yourself as the trustee. If you become incapacitated, a successor trustee would take over to manage the assets. When you pass away, the successor trustee would distribute the trust assets to the beneficiaries named in the trust instrument.

A living trust can hold a wide range of assets, including:

• Real estate
• The family home
• Vacation properties
• Investment properties
• Checking and savings accounts
• Certificates of deposit
• Stocks, bonds, and mutual funds
• Personal property
• Jewelry, artwork, and collectibles
• Business interests

It’s essential to ensure a living trust is set up properly in order for it to be effective. In addition to drafting the trust instrument, the trust must be funded — this means transferring ownership of your assets to the trust by retitling them from your name to the name of the trust. Failure to fund a trust can result in your assets going through the probate process and not being distributed in accordance with your wishes.

Reasons to Update a Living Trust

Since a living trust is revocable, you may change any aspect of the trust during your lifetime. This includes updating the named beneficiaries, changing the asset distribution plan, replacing the trustee, and amending the property held in the trust. If you decide that the trust no longer reflects your wishes at all, you can revoke the trust entirely.

Several common reasons to make a living trust amendment can include the following:

• Major life events — Major life events, such as marriage, divorce, or the arrival of a new child may require your trust to be updated to provide for a new beneficiary. You may also decide to make changes to your living trust when your children reach the age of 18.
• Changes to your financial situation — Any shifts in your financial situation may mean you need to change the asset distribution plan in your trust.
• Increases or decreases in wealth — If you experience an increase or decrease in wealth, you may need to amend your trust to ensure it aligns with your financial goals.
• You have acquired new property — If you have acquired new assets, your trust can be amended to include them.
• The tax laws have changed — Tax laws are constantly evolving. Any legislative changes may warrant a review of your living trust to ensure the instrument is still effective in satisfying your estate planning objectives.
• Changes in your family dynamics — If there are changes in your family dynamics or your relationship with a beneficiary, you may need to amend your living trust.

To update a living trust, an amendment would need to be made to the original trust that clearly specifies the changes. Typically, the trust instrument would outline the amendment procedures. If substantial changes must be made, a restatement of a trust may be the better option. A restatement does not amend the trust — it effectively rewrites it to incorporate the changes.

How Often Should I Review My Living Trust?

Generally, it’s best to review a living trust every three to five years — or whenever a significant change in your life occurs. Although a major life change doesn’t always warrant a living trust amendment, you should at least revisit the document to determine how the change would impact asset distribution. For example, if you divorce and your former spouse is a beneficiary, you may need to make a change immediately to avoid any unintended consequences.

Periodic review of your trust can help ensure it reflects your wishes regarding the distribution of your assets. By keeping your trust up to date, you can also help reduce the risk of ambiguities that could lead to disputes among the beneficiaries.

Contact an Experienced California Estate Attorney

If you are considering amending a living trust, it’s important to have a knowledgeable attorney who can ensure the changes are valid and enforceable. The California trusts and estates attorneys at White and Bright work with individuals and their families for a wide range of estate planning matters. We welcome you to contact us online or call (760) 747-3200 to schedule a consultation.