Answer to an Email Question re: Restated Trusts

Q: Is a restatement of trust different than a normal run-of-the-mill trust?

A: A revocable living trust is specifically designed to meet estate planning needs. Like all good estate plans, it is designed to anticipate changes and to accommodate many of the most common ones. However, no matter how thorough an estate plan may be, it simply can't address all the changes in circumstances we encounter in our lives. This is why most estate plans can be amended or revoked.

In most revocable living trusts, the grantor reserves the right to revoke or amend the trust in whole or in part. It's not uncommon for a person to add or delete a beneficiary or adjust the percentage or amount the beneficiary will receive or change a trustee.

Because it is so easy to amend a trust, some people do it on a fairly regular basis. I've seen trusts with eight or nine amendments -- although effective multiple amendments can make a trust difficult to read and follow. At some point, it simply becomes necessary to replace the trust in whole. In some circumstances, the trust document is outdated or fails to provide adequate provisions.

The problem with creating a new trust is that all of the assets titled in the name of the first trust must be transferred into the new one. A fully funded trust agreement takes some work and likely a person does not want to re-title assets. The thought of doing it all over again is probably a bit daunting.

This is where a restatement comes in. A restatement is simply a complete and total amendment of the original trust which replaces it in its entirety. In other words, the restatement reflects the terms of the new trust agreement and replaces both the original agreement and any amendments that may have been made to it.

The great thing about restating a trust is that it refers back to the original trust agreement and its creation. In effect, you have created a new trust agreement but you don't have to re-title the assets into the name of the new trust. Because it simply replaces the original trust agreement, it's already funded.

It's really not that unusual to come across a restated trust. As frequently as people change their minds, it's a wonder that you don't see more of them.

Where Are We On The Estate Tax?

According to to The Hill, if I may quote the title, the "Debate over estate tax likely to wait til 2010" by Walter Alarkon, 9/15/09. This isn't surprising since it is what many of us suspected. The writer states that between the split among Democrats and a very full Fall agenda, it won't happen this year. Some experts and congressional aides have been saying that to buy time, Congress will likely pass a one-year extension in order to deal with the expiring estate tax next year.

Even though the Senate Fiance Committee Chairman Max Baucus considers the estate tax a "must-do" items, it isn't on the committee's schedule, with most of the meetings revolving around the healthcare reform bill.

So where were we while we wait? Both the President and Committee Chairman Baucus want to make permanent the 2009 rate (45% and 3.5M exemption) and indexing for inflation for future years. One strong contender is our own Arizona Senator Jon Kyle, who has joined with a more centrist Democrat Sen. Blance Lincoln, on a 35% rate and increase the exemption to $5 million.

We'll have to see what happens in 2009 but my guess is we will be waiting until next year for final word.

My Best,

Jim

Some comments on recent articles and blogs.

In The Southern.com, it talks about a woman that only had two wishes for her will. One, she wanted to be cremated, and two, she wanted her ashes spread in Walmart. Allegedly she stated that this was the only way she could be sure her daughters would visit her twice a week. Unsure if that is a true story but an interesting approach to one's burial.

Jill Schlesinger, a financial writer and speaker associated with CBS News, wrote the following in her blog a couple of weeks ago:

.... I delivered a presentation about personal financial responsibility. When I conduct these affairs, I try to talk about the sexy stuff (stock market, investing) long enough to hook my audience before telling them one of the great lessons that I learned as an investment adviser/financial planner: people need to think a little bit less about their 401 (k) plans and lot more about their estate planning. The biggest problem that I saw in my 15-year practice was not a poorly-allocated portfolio–it was the astounding number of people who did not have what I consider essential estate documents: a will, a durable power of attorney and a health care proxy.

I couldn't agree more. In my years of practice, I have noticed two types of financial advisers. Some that work with their clients on their entire financial picture, which includes risk management, their financial and non-financial goals, and investment advice. The other type of advisor is the one that doesn't.

The Seattle Times reported on September 12 that a revocable trust won the State's Lotto. I found that interesting. For many years, estate planning attorneys felt that trusts were a superior estate planning document over a will but discovered some resistance in their implementation. For a while, clients were suspicious of a trust and thought that only the wealthy used them. Some financial institutions were reluctant to recognize trusts without going to their legal departments for clarification first. Now we have come so far that a trust is the winner of a lottery. Of course the trust isn't out there gambling but its grantor is, and must have registered its trust as the owner of the Lotto proceeds. We have come a long way in recognizing this superior estate planning device.

My Best,

Jim