Here's a question I get a fair amount: "Should we list all of our property on a schedule attached to our living trusts?" I see trusts (usually older ones) with schedules attached, but my answer is typically "no." Property changes -- we buy a new house, switch our investment accounts from one custodian to another, and change our life insurance policies. To my mind, the schedule can raise confusion -- why does it list Schwab account #12345678 when no records for this account can be found?
A better solution is to make a list of your property, including how it's titled (or who the beneficiaries are), and put that list with your original estate planning documents. And make sure to update it every year or so.
"The general approach is that the miles belong to the airline," said Jared Blank, Editor of Online Travel Review.
An effective estate plan should be flexible enough to accommodate changes in circumstances -- maybe not every change, but many of them. For instance, instead of specifically referencing the estate tax exemption amount when drafted, most well-drafted documents contain a formula based on the exemption amount in effect when the decedent dies. But does your estate plan account for the possibility that there will be NO federal estate tax when you die?
A lot of married couples have what's known as an A-B plan. If one spouse dies, two trusts are created for the survivor:
(A) Family Trust: usually containing an amount equal to the federal estate tax exemption amount at the death of the first to die
(B) Marital Trust: containing everything else owned by the first to die
The goal is no federal estate tax at the death of the first to die. The Family Trust is by definition exempt from federal estate tax, and the Marital Trust qualifies for the marital deduction (so is not subject to federal estate tax). The surviving spouse is the only beneficiary of the Marital Trust; the Family Trust's beneficiaries might be just the surviving spouse, the surviving spouse and kids of first to die, or just the kids of the first to die.
But what happens if there's no estate tax whatsoever? If the above language is used, the Family Trust isn't created (no exemption = no federal estate tax = no Family Trust). So there's just a Marital Trust.
Alternatively, you could draft a trust whereby the Marital Trust contains the "smallest amount that will result in no federal estate tax," and the Family Trust contains everything else. Under that scenario, no Marital Trust is created (the "smallest amount" would be $0). So there's just a Family Trust.
So what's the problem? There may not be one, if we're talking about a traditional nuclear family where the spouse is also the sole beneficiary of the Family Trust. But what if both spouses have children from a prior marriage? In that case, we may have a Family Trust of which the surviving spouse isn't the sole beneficiary (or not a beneficiary at all). And we run the risk, under the above scenarios, of either shortchanging the surviving spouse (no Marital Trust created) or shortchanging the kids (no Family Trust created).
