(4) Limits of a will or living trust

Limits of a Will

Unfortunately a Will doesn't go into action until after your death. 

So, in case of illness, the fact that you have a will is irrelevant. It doesn't give another person the right to sign your name on any documents or make decisions. It just sits in your file cabinet or safe deposit box. And doesn't help you or your family. 


Living Trust

Contrary, a living trust is useful on incapacity. Your successor trustee can step in and do what's needed.

And, at death, it can avoid the need to go to probate court to have a will approved. That is what attracts many people to it at first. But there's more to it than that.


Maybe you've signed a living trust already

When was the last time you looked at it? Have things in your life changed quite a bit?

If you have a trust - but nothing in the name of the trust - this can be an issue. How are your assets owned? Maybe those assets are still in your sole name. Or in joint name.  

When we do an estate planning/living trust review, we consistently see there's no assets in the trust's name. You haven't changed the legal ownership of a major asset from you to the trust.

This process of naming the trust to be owner of an account is called 'funding' the trust.


If you don't fund a trust, two things are possible...

First, the sole assets will need to pass through probate. So the trust can own the assets after that. A pour-over will directs that post-death transfer from probate estate to a living trust.

• Yet, keep in mind that probate is not the end of the world, despite the ranting of some.
• Yet it's sometimes an expensive detour to getting your assets to your loved ones. A delay and cost. And going through probate does not build character or make you a better person.

Second, remember that you face Massachusetts estate taxes if your assets exceed $1 million. If you're married, without a living trust plan, your family's estate tax bill may be higher than needed.

• If married, those MA estate taxes will be due at the second death. Because you're not using the tax saving provisions of your married living trust.

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By failing to put any assets into your trust, higher taxes can occur. Because you're not using the estate tax provisions typically part of a married person's living trust.

• Yes, the provision is IN the document but not actually USED when you die.

Instead, your first million will go to your spouse along with all other joint assets. Then, on the second death, all will be subject to estate tax. It all gets bunched up together, for the tax man.

Want to improve your own estate planning for your family? Learn more at 7 Questions to Test the Strength of Your Estate Plan

Outdated Living Trust and Documents

What's happened since you signed a Living Trust?

• Has someone you named in it died?
• Or has become seriously ill?

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In our practice, we write clients twice each year.

• In our letter, we remind them of the above possibilities. And many others. And encourage them to ponder if they may need to alter their documents.

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It's essential to do estate planning correctly at the start and ALSO keep it right over time. Like it or not, time keeps moving along. And we see lots of out-of-date estate planning.

So, review your current estate planning documents.

Then you can figure out if you should amend or replace them.

Completely replacing a document can be better. It can be more useful and even more cost-effective than cutting up old documents.

This decision depends on the particular situation. Each case is different. It takes time and focus to figure it out.

Useful is a professional who finds the quiet to review it.