It’s a good idea to have your estate planning documents reviewed every 5 to 10 years or if there is a significant change to your family situation or finances, or the law. The importance of having an estate planning attorney review your current estate planning documents can the mean the difference between the smooth administration of your estate and trust when you pass away and unintended consequences such as property being left to someone you no longer intended to receive property, property being tied up in a needlessly complex estate plan or, even worse, the imposition of estate taxes. Case in point, a married couple had estate planning documents (including revocable trusts) prepared for them back in 1985 (for those of you that can’t remember back that far, that was the year the Bears went 15-1 and won the Super Bowl in 1986). Unfortunately, the husband passed away in 2016 and never had his documents changed during those 30+ years. When the family came to us to help administer his estate and trust, the husband’s estate owed $300,000 in Illinois estate taxes! To make matters worse, if the husband had his estate planning documents reviewed prior to his passing, his documents (in particular, his trust) could have been amended to avoid Illinois estate taxes entirely!
Fortunately, we were still able to help the family avoid all Illinois estates taxes through a process known as decanting. Briefly, decanting allows the trustee of a trust under limited circumstances to transfer trust assets to a new trust. In this case, the husband’s trust qualified for decanting and we drafted a new trust to which assets from the husband’s trust were transferred to avoid the Illinois estate taxes. I know. I’m just as surprised as you are, but the State of Illinois allows trusts to use the decanting process – if the trust qualifies – to avoid Illinois estate taxes.
Bear in mind, though, that decanting is allowed only under limited circumstances and should not be relied upon as a cure for outdated estate planning documents. Rather, the better and more cost-efficient option is to have your estate planning documents reviewed every 5 to 10 years or if your family situation, finances or the laws change; and, if necessary, amend your estate planning documents. No one has a crystal ball and can predict what will happen as life goes on. People go through significant changes throughout their lives and estate plans should likewise be amended to reflect those changes. An estate plan should not be viewed as something that is static and never needs to change. Rather, estate plans should be viewed as fluid and flexible – something that can and should be changed if your unique family and financial situation, or changes in the law, call for it.