Do I need to update my trust after my spouse dies?
If your spouse passed away recently and you are still in the process of picking up the pieces, then you may wonder how this impacts your estate planning. In particular, you may not know whether there is anything you need to do with regards to your trust.
Here are a few things you should do immediately:
Find the trust document and read through it in its entirety.
Determine if any assets held in trust need to be shifted to a sub trust
Determine if an estate tax return needs to be filed to elect portability or the QTIP election
If you need assistance with reviewing your trust, and if your old estate planning attorney isn’t responsive (or is no longer in practice), then give me a call and I’d be happy to review your trust document at no charge to you (you can reach me at 781 202 6368 or email me at jlento@perennialtrust.com)
In reviewing your trust, you should be aware of a few traps that many people aren’t aware of until years after their spouse has died. The 3 traps / scenarios that you need to look out for when reviewing your trust are as follows:
Two Separate Trusts - if you and your late spouse have separate trusts, then you are almost guaranteed to have to take action within 9 months of your spouse’s death to make sure the proper tax elections are made - call your tax accountant ASAP to get a tax ID number and valuations completed as needed. If you don’t have an accountant - give me a call and I’ll try to steer you in the right direction
Single Joint Trust - many of my clients estate plans (for most families under $5 million in assets) will use a single joint trust rather than two separate trusts to make their lives easier. Joint trusts come in two flavors
a.) Trusts that become irrevocable upon death of first spouse -
If you fall into this category then you will need a tax ID number ASAP and you may be dealing with sub trusts like a family credit shelter trust or a split marital trust.
b.) Trusts that are still revocable upon death of first spouse (and only becomes irrevocable after death of the surviving spouse) -
If you fall under this category, then you may not have the same tax deadlines as the other scenarios, but you still need to review the trust to make sure there are no early distributions - meaning you need to see if there are gifts that your spouse wanted to go to certain kids or beneficiaries immediately after your spouse’s death rather than have them wait until after your (the surviving spouse’s) death.
For example, there may be a clause that states a certain percentage or dollar amount should go to each child or grandchild at that time even though you are still living because your spouse may have felt that you have more than enough to support yourself financially in what remains.Testamentary Trust (created via Will) - if you and your spouse set up your wills to create trusts for one another via the probate process (for asset protection purposes), then you have more administrative obstacles to overcome. I’ve seen this several times where the surviving spouse can’t figure out why their late husband or wife would intentionally plan a part of their estate to go through probate only to be placed in a different trust that you (the surviving spouse) don’t directly control. Whether you remember it or not, you and your spouse may have done this type of estate planning to protect against nursing home risk without realizing the probate implications of this estate planning strategy.
To get around this, you’ll need to petition the court for informal (hopefully not formal) probate, have a personal representative appointed (in order to have authority to make the necessary transfers), and then complete the transfer of property accordingly subject to the restrictions and limitations of your late spouse’s will and testamentary trust.
Now you may be thinking - “but what about my own trust, is there anything I can change or should change in it?”
The answer depends on whether you are allowed to update your own trust based on the scenarios outlined above. If you have a separate trust (independent from your late spouse) or a joint trust that specifically authorizes you to be able to change/amend the document, then you will certainly want to revisit your financial situation, your family situation, and your current perspectives on life to determine whether your existing trust still fulfills your wishes and intentions.
The worst thing you can do is sit on the uncertainty, because, as time goes on, you may miss important tax deadlines or distributions that were designed to protect your (and your deceased spouse’s) intentions. This is especially true if you have multiple real estate properties or investment properties that need to be legally untangled or reorganized based on your current situation. If it’s only been a few months and you need more time to go through the grieving process, then have one or more of your adult children read the documents to see if they can handle some of the immediate administrative burden.
If you are reading this and thinking to yourself - “I still don’t really understand what I need to do or where I should begin” then give me a call and I’ll point you in the right direction.
You can reach me at 781 202 6368, email jlento@perennialtrust.com, or click here to schedule your free personal consultation.
I’m always happy to help,
Joseph M. Lento, J.D.
Your Local Estate Planning Attorney
www.PerennialEstatePlanning.com
477 Main Street
Stoneham, MA 02180
