How to Review a Living Trust

I’ve found that it’s crucial to review a living trust every 3 to 5 years. Things change. If the cousin that you named as trustee has filed bankruptcy and just got out of rehab, he’s probably not going to be a top-notch trustee. Or your "young" child may now be 27 years old and capable of acting as his or her own trustee.

I do not charge existing clients to review their trusts. That’s because I want them to come in and go over things. I do charge for preparing amendments and restatements and helping the client to “fund” the trust.

The client brings the following to a review appointment :

  1. Copy of living trust.
  2. Original will (we need the original, not a copy—mainly to prove that it exists).
  3. Originals of power of attorney for property health care and living will—again, simply to prove that they exist.
  4. A list of current assets including account statements and beneficiary designations. I need to determine if all assets are correctly titled in the name of the trust. To do that, we need written proof that the asset is in the trust or that the trust is beneficiary.

The first thing that I do is look at the trust to see if it leaves property to the correct people. Many clients have no idea what their trust says! Then I check to be sure that the back-up trustees are the right people. The most common change to a living trust is changing the name of the backup trustee. If minor changes are needed, I do an amendment. If several changes are needed, I prepare a restatement of the trust. I much prefer restatements because they are easier to follow than amendments.

The next thing we do is look at the titling of all of the assets. The following assets are not put in the living trust: Car, checking account, IRA accounts. The house is put in the living trust if the client is single, divorced or widowed. If the clients are a young couple (meaning under the age of 60 or so) then we often leave the house as "tenants by the entirety," but the clients sign a deed to one spouse’s trust that we do not record. That original deed must be in the trust binder (and it’s recorded later). This will assure that the house avoids probate and protects the house from creditors.

Reviewing a trust takes only 30 minutes or so, but it’s essential to have an estate plan that works.

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