Harry Margolis is a nationally prominent attorney and elder law specialist who is also a prolific writer about legal issues of interest to older Americans as well as to the adult children of aging parents.
He recently wrote an important article that anyone who thinks they have already done the critical legal planning steps necessary-including setting up a trust should read.
9 (Potential) Problems with Your Trust - Massachusetts
Do you have the right successor trustees? Typically
you will be the trustee of your own revocable trust with your spouse as
co-trustee (if you're married). Trusts should name one or more
successors in the event the original trustee or trustees are unable to
serve. Make sure that you still want the successors you originally
named. Also, do you want them to come on and begin acting as trustee
now? And if you and your spouse are co-trustees, do you want the
successor or successors to step in when the first of you becomes
incapacitated or passes away or not until neither of you can serve?
Who can remove trustees? You can always change the
trustees of your revocable trust. But do you want your heirs to have
this right after you pass away? This can often avoid problems if there
are communication problems or disagreements with the trustee. On the
other hand, you might want to limit this to some extent to make sure
heirs aren't just looking for a trustee to do whatever they say.
Can your spouse change the ultimate distribution of trust assets after you have passed away?
Many trusts give surviving spouses a so-called power of appointment to
redirect trust assets at their death. This can be important to provide
for flexibility to respond to changes in family circumstances. However,
this usually doesn't make sense in second marriages. In a Massachusetts
court case, the second wife used her power to give everything to her
children instead of the original beneficiaries: her deceased husband's
children. Even in the case of a first marriage, removing this provision
from the trust can provide protection for children and grandchildren in
case the surviving spouse remarries and becomes estranged from his
Does your trust protect your children and grandchildren from lawsuits and divorce? You have the option of drafting your trust to continue for your children's lives to provide creditor and divorce protection.
Have you funded your trust? We often see great trust
documents that don't do all that's intended because the clients' assets
are still titled in their names. You can avoid probate and make sure
that the estate tax protections in your trust operate as planned through
retitling assets in the name of the trust.
Who is named as beneficiary of your retirement plans and other investments?
Often clients spend hours with their attorneys crafting an estate plan
to match their goals and them circumvent it through naming individuals
as beneficiaries of retirement plans and investment accounts. Make sure
these are all coordinated.
At what age from children and grandchildren receive their inheritance?
Most trusts provide that funds will remain in trust until those
inheriting reach a certain age, often 21 or 25. But you can set any age
you choose and even permit them to withdraw a portion of the trust at
set ages, say half at 25 and half at 30, or a third each at 25, 30 and
35. This doesn't mean that they can't benefit from the trust assets in
the meantime, but that distribution decisions are made by the trustees
until children and grandchildren have more financial experience.
Does your trust have provisions providing for maximum tax deferral if it is named the beneficiary of a retirement plan?
While you may choose to have your retirement plans go directly to your
heirs -- and often this is the simplest approach -- if they are going to
your trust, it must have special provisions to stretch out the annual
required distributions for as long as possible.
Is your trust up-to-date for estate tax purposes?
Congress and many states have changed the estate tax laws several times
in recent years. If your trust is more than five years old, or if you
lived in a different state when it was drafted, it should be reviewed by
an estate planning attorney to make certain it is still current.
Margolis & Bloom, LLP, practices estate, long-term care and special needs planning in Boston, Dedham, Framingham and Woburn with a strong commitment to client service. If you have questions about these or other legal matters, do not hesitate to contact us by e-mail by clicking here or by calling us at 617.267.9700.