Like many people, you may have elected to include one or more trust agreements in your overall estate plan. Once established, a trust agreement should function according to the terms of the agreement indefinitely. You may wonder, however, “ If the tax laws change is my trust still valid?
Issues relating to wills, trusts, and estates are largely governed by state laws; however, federal tax laws can also certainly impact a trust agreement. Moreover, both federal and state tax laws are subject to change – and do change frequently. When a tax law changes it come have a direct impact on an existing trust agreement. While it will not invalidate an existing trust it could lead to the need to amend, or even restate, the trust agreement to account for the tax changes.
Amending a trust can be done relatively easily. As a general rule, a trust amendment is done by writing out what needs to be changed in the trust agreement and titling the document “Trust Amendment”. The amendment is then attached to the original trust agreement. Amending a trust only works, however, when a relatively minor change needs to be made to the trust. When more significant changes need to be made, or when there have been a serious of smaller amendments, it becomes necessary to restate the trust agreement. Restating a trust agreement involves essentially rewriting the trust agreement and incorporating all the changes. When a tax law has impacted a trust it may be necessary to do a trust restatement if the new law substantially changes the terms of the trust.
Why not simply create a new trust agreement? Because doing that would require you to transfer all the trust assets out of the original trust and then back into the new trust. Doing that could result in yet more tax conse?quences because each asset would technically change ownership two times during the process. Moreover, transferring all the assets from one trust to another takes time that doesn’t need to be spent if you use a trust restatement instead.
Always be sure to consult with Illinois estate planning attorney if you are concerned that a tax law will impact a trust agreement you have established. If an amendment or restatement is required your attorney can help you choose which is required and facilitate the changes.
If you have additional questions or concerns about trust agreements, or your Illinois estate plan in general, contact the experienced Illinois estate planning attorneys at Nash, Nash, Bean & Ford, LLP by calling 309-944-2188 to schedule your appointment today.
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