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Is it time to review your trust?

There’s no question that there are certain tasks that many of us know are important but still put off doing because we are perhaps dreading the time commitment they may entail. For instance, these tasks may include doing our taxes, refinancing our mortgage, examining our retirement investments and, of course, executing an estate plan.

This is not to say, however, that everyone is victimized by procrastination as countless people have indeed taken the necessary steps to execute an estate plan, which may consist primarily of a trust.

While this is certainly commendable, it’s important for those who have executed a trust to sit down and review their trust every so often to ensure that it not only remains legally compliant, but that it also reflects their unique wishes regarding the disposition of their assets.

To recap, a trust is essentially a legal mechanism through which a trust company or designated person (i.e., the trustee) holds property for their own benefit or that of another (i.e., the beneficiary). Trusts can be either revocable, meaning they can altered at any time by their creator, or irrevocable, meaning they can’t be changed or terminated once executed.

The primary advantages of trusts are that they bypass costly probate proceedings, enable a person to keep things private, protect assets from certain types of legal actions and present more favorable tax treatment.

How often then should a person sit down with a legal professional to review their trust?

According to experts, there is no definitive answer to this question. Rather, it is something that should likely be considered in the event of a substantial change in assets or family circumstances, or if a rather lengthy period of time has passed.

“Our rule of thumb is to review the plan at least once every four years,” said one estate planning attorney. “So we encourage our clients to review their plans each time we have a presidential election.”

Some of the issues that may require attention include the planned distribution of assets, the adequacy of the current trustee, the need to appoint a backup trustee and perhaps even the need to include a provision granting the power to remove the trustee under certain circumstances.

To learn more about your options for reviewing and executing a trust, consider speaking with an experienced legal professional who can answer your questions, explain the law and help put your mind at ease.

Source: The Richmond Times-Dispatch, “Estate planning: A checklist for reviewing your trust,” Pamela Yip, May 10, 2014