Year-End Trust Planning, Part 1

It’s December and you’re thinking “Hey, it’s the end of the year. Maybe I should pull this dusty ol’ trust out of the closet and shine it up a bit for the holidays”.

I got you covered.

This is Part 1 in a series about how to make that ol’ trust shine - AND make your tax professional and attorney happy.

Step 1 - Go find the documents that created the Trust

What documents, you say? I don’t think this Trust has documents…

Yeah, I hear that a lot.

So, there are implicit trusts and explicit trusts. Almost all of the time, Trusts are explicit, which means they’ve been written down. By someone fancy, like an attorney. Hopefully a Trusts and Estates attorney.

::PSA: Don’t go to Nolo for your Trust documents. That’s it’s OWN discussion.::

At the very least, you will have either a Trust document or a Will. Typically, you’ll have a Trust document when the Trust was created during someone’s life; you’ll have a Will if a Trust was created through someone’s death.

So go find that and scan it somewhere safe.

Also send a copy to your attorney and tax professional.

Step 2 - Go find all of the rest of the documents related to this Trust

You say, “listen lady, I just found this Trust document and it took me FOUR days of digging through all of my paperwork. What do you mean there are more documents?”

If your Trust has ever been modified, updated, tweaked, clarified, amended, or entirely scrapped except for one paragraph, then there are more documents. Once again, they will have been written by fancy people like attorneys.

You need these documents as much as you need the original documents. Why? Let’s say you decided to remove your niece Cinderella as a beneficiary because she wouldn’t stop talking to birds. Well, nobody is going to know that unless you have those documents. And, once again, send these updates to your attorney and tax advisor.

Step 3 - Read the original Trust document and related changes and make sure everything you’re supposed to be doing is being done.

For example, let’s say that when your nephew turns 18, the Trust is required to buy him a supersized F-150 truck in candy apple red with oversized tires. If he’s 35 years old now and he never got his shiny red truck, you will want to check in with your attorney. Your Trusts and Estates attorney, not your business attorney.

Another example, let’s say that you were supposed to be distributing income annually, but you didn’t know that because you hadn’t had a chance to read the trust document. Again, this is a great time to connect with your attorney and loop in your tax professional to get things tidied up.

Bonus Note - If you can’t make heads or tails of the Trust document, your attorney might have prepared a Trust summary for you. If that’s not in the pile of documents you’ve now collected, I recommend having your attorney not only prepare a Trust summary but also a flowchart. Your tax professional may have one of their own as well.

This might sound like a lot of work, but getting acquainted with your Trust and making sure your advisors are ALSO in the loop is a great first step to getting that Trust in tip-top shape.

In Part 2, we’ll talk about FAI and Distributions. If you’re saying “FAI? What’s that? Did you make that up?” then you’ll enjoy the discussion as much as everyone else that hears about FAI…

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