When to Update Your Trust and Estate Plan

By Libby Banks, The Law Office of Libby Banks

I review many trusts. Some are quite old, and my client knows it is time for an update. Other times, they were done not terribly long ago, but the laws have changed. How do you know when it is time to update your trust?

There are a couple of key dates that give some answers. First, the Arizona Trust Code was enacted in 2008, to become effective in 2009. The Arizona Trust Code changed the law governing trusts in a substantial way. Thus, if your trust was done around this time or before, an update is in order.

Another key date is 2012. Before 2012, estate taxes were an issue for many people. As an example: In 2001, the Federal law gave each person an estate tax exemption of $675,000. That meant that if your total assets were more, your family might end up paying estate taxes of 40% on anything over $675,000.

Older trusts had complicated planning to avoid estate taxes because of the low exemption amounts. However, you may not need that complicated plan today, because each person’s estate tax exemption is now over $13 million (but will be reduced to about $6.5 million per person in 2026).

The old planning to avoid estate taxes usually involved creating a second, irrevocable trust on the death of one of the spouses. This was called “A” and “B” trust planning. While the surviving spouse still benefits from both trusts, the irrevocable trust cannot be changed and has its own tax identification number and its own separate tax return.

If you don’t have a taxable estate, the division into two trusts at the death of the first spouse may not only be unnecessary but undesirable. When we look at whether to update these provisions of your trust, we analyze all of this and decide what is best for you given your situation and how the estate tax laws impact you.

In addition to the need to update because of new law, some changes may be needed to your trust just due to the passage of time. Your children or beneficiaries are older. Maybe you’ve had another child that’s not listed, or you now have grandchildren to include. The people you named as trustees and financial agents may not be the best choice any longer. Your decisions on how to distribute your assets may not be what you wish now.

All of these are important reasons to get a review of your trust. In our office we recommend that you have a review of your estate plan every three to five years. In particular, if your trust was done before 2012, please contact us for our no-charge, 10-point review so that together we can determine if your plan still makes sense for you and your family. Call us at 602-375-6752 to make an appointment today.