Estate Planning that Grows with the Family

Since restarting the blog, we focused on the basics of estate planning with an emphasis on how the documents work. Our next few blogs will focus on the how having an estate plan can be a benefit under a variety of circumstance. All of these examples come from our work, though we have changed the details to protect attorney-client privilege.

As part of an estate plan, a Living Trust provides substantial flexibility to evolve over the lifetime of a client. Take for example Amy and Brian who began working with us shortly after they had their first child Cassie. At that time, both Amy and Brian were young adults with no particular health concerns, so their initial estate plan addressed what would happen to Cassie if Amy and Brian both died. We designed a plan to take into account the next 3-5 years, as in that time it was likely that Amy and Brian’s lives would continue to change.

We drafted Wills for Amy and Brian, primarily to Appoint Guardians that ensured Amy and Brian chose who would raise their child in the event of their deaths. We also established a Living Trust that contained broad general authority for a successor Trustee to provide for Cassie’s financial well-being in the event of Amy and Brian’s death. The Living Trust also contained provisions for distributing any remaining Trust funds  to Cassie when she reached age 25. Finally, we worked with Amy and Brian to “fund” their Living Trust making sure that their home, bank accounts, and mutual fund accounts were all owned by the Living Trust.  We also made sure that their life insurance and retirement accounts named the Living Trust as a beneficiary. This funding ensures that in the event of Amy and Brian’s deaths the Trustee would control all of their assets without any probate.

This “simple” plan ensured that the Probate Court would have no part in administering Amy and Brian’s assets, that Cassie (and her Guardians) would have funds to provide for her care, and that upon reaching age 25 Cassie would receive the remainder of her inheritance outright and free of trust. While this plan did not consider  every possible contingency, it did create a groundwork for protecting Cassie in the event of Amy and Brian’s unexpected deaths and built in Trustee flexibility. The plan also created the groundwork for more expansive planning as Amy and Brian’s lives changed.

Over the next fifteen years, Amy and Brian’s lives changed substantially. Three years after our initial meeting Cassie got a little brother, David, five years after our initial meeting Amy and Brian bought a new home, and ten years later Brian’s mother Edna moved in with Amy and Brian after the death of her husband. As these changes occurred in Amy and Brian’s lives we assisted them in making small changes (to ensure that assets were split between Cassie and David), kept funding up to date (by making the Living Trust the owner of their new home), and made significant changes to their trust to address their role as caregivers for Edna.

Throughout the years, we amended or restated Amy and Brian’s initial Living Trust, making the desired changes without needing to re-fund all of their assets. We additionally were able assist them in adding assets to their Living Trust as they acquired those assets over the years. Had it been necessary, we could also have changed the people named as successor Trustees or Guardians.

It has now been twenty-five years since we began working with Amy and Brian, their children are adults, and as we review their planning they continue to have options. We always hope that our client’s families thrive without problems, but if Cassie or David appeared to have risk factors that a sudden influx of wealth could exacerbate, Amy and Brian could adjust the distribution terms of the Living Trust to allow their successor Trustees more authority over funds. As it is, Cassie and David have done well for themselves and in their most recent documents Amy and Brian decided to name their children as their successor Trustees and distribute all of their inheritance to them immediately.

This example of a “simple” plan that evolves through a client’s lifetime demonstrates the flexibility of estate planning to adapt to changing circumstances. Over the next few blogs, we will lay out how a Living Trust can protect clients and their loved ones over more complex circumstances. We implore you to remember our warning that a Living Trust is a complex legal document and it is important that you work with an experienced attorney and not attempt to DIY a document designed to protect your family’s future.

Matt and Al