Like a will, a trust needs to be updated when a life situation changes. A recent problem came across my desk. Tom, a client, was left a trust after his parents died. They had drawn up the trust in the 1950’s, when he was a child. The trust stipulated that the trustees could decide if the child, who is a beneficiary, could take out more than the income it was creating each year. This was to preserve the trust and protect a young person from having too much money on his own.
The parents died twenty years ago and the money had remained in this trust. He was grateful to have the added annual income the trust provided and never asked the trustees for more. He thought that is the way it had to be always. He came to me as he was getting ready to retire and wanted to create a plan. He also wanted to help his children buy houses and pay off his home. He is still tied to the trustees’ decision-making process. This provision is silly for a grown man or woman who has managed their own money all their life.
So think about a simple life change: update your legal documents. Whether your children have grown up, the needs for a trust have changed, you have remarried, or the laws have changed, these critical documents need to be reviewed every five years if not sooner. Be sure and spend the time, energy and money to update the documents as appropriate.
And for those adult children out there: talk to your loved ones. Your parents may have had good intentions when you were a child. Now, you may want to remind them to update their own estate planning documents - after you update your own. This will be for their peace of mind and your ability to use the intended money for what you see fit.
With coaching from me, Tom wrote a letter to the trustees making a request for the money to pay off his mortgage. With the mortgage paid off and a better understanding of the trustee role, he requested the balance of $35,000 to be paid to him so he could help his children with housing. He was a happy retiree and grateful he sought out advice. The end of the trust meant all the money intended for him was in his hands and he trusted himself with money more than a large institution that did not know him.
