Estate Planning: A Preventive Law Check-Up

Estate Planning: A Preventive Law Check-Up

John and his wife Mary set up a revocable living trust with attorney Mike in the 1990s. Mike has been sending John and Mary update letters, but has received no response. If Mike called John and Mary, the conversation might go something like this:

Mike: I wanted to do a quick phone review of your estate plan.

John: I think we’re OK. That’s why we never responded to your letters.

Mike: This will only take a minute. If you have re-financed your real estate, was it removed from your trust during that process?

Mary: We have re-financed all our real properties several times, but I don’t know whether or not they were removed from of the trust.

Mike: Who are the primary and contingent beneficiaries on your IRAs and retirement plans and life insurance policies?

John: When we filled out beneficiary forms, we just sent them in. We didn’t keep a copy.

Mike: On your personal bank and brokerage accounts, are they titled in the name of your trust?

Mary: I would have to check our statements. Some of them might be in the trust.

Mike: Do you recall what happens to your trust when one of you dies?

John: Well, we have a revocable trust, so that must mean it stays revocable.

Mike: For many married couple trusts, a portion becomes irrevocable when one spouse dies, and the surviving spouse’s rights in the first-spouse-to-die’s portion become limited.

Mary: Why would we have chosen something like that?

Mike: To save estate taxes by protecting the amount that the first-spouse-to-die can give away free of estate tax.

John: So you’re saying that if part of the trust becomes irrevocable when one spouse dies, that was a wise choice?

Mike: It may have been when the trust was signed, but because the amount that a person can give away at death free of estate tax has increased dramatically, we should re-examine whether or not the restrictions placed on the surviving spouse are still necessary. There is also a new law called portability which allows the surviving spouse to claim the first-spouse-to-die’s free amount, and you need to understand how that works before you determine whether or not to amend your trust.

Mary: Why didn’t you tell us about this earlier?

John: I have copies of several letters that I sent you on each of the points I just raised, but I never heard back from you.


About randyspiro

I am a super lawyer in California with dual specialization in Estate Planning and Taxation.
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