Dear Len & Rosie,

We have a living trust that we created twenty years ago. I believe the trust is called an “A/B Living Trust.” Over the last ten years we have kept all assets in the trust. The company that created the trust has called and said that it is a good idea to restate the trust especially because it is an A/B trust. Of course they want us to pay for it. Is it really necessary to restate the trust given that we haven’t changed our beneficiaries, or our assets?

Christine

Dear Christine,

The way your A/B trust works is that upon the death of the first of you to die, the trust is divided into two or sometimes three subtrusts. The B trust, frequently called the “Bypass” or “Exemption” or “Decedent’s” trust is an irrevocable trust funded with the portion of the deceased spouse’s assets that pass free of federal estate tax. The surviving spouse usually gets all of the income of the B trust, and may dip into the principal of the B trust if the A trust assets and assets outside the trust are insufficient to pay for the surviving spouse’s needs.

Think of it this way: The A trust is for the Above Ground Spouse and the B trust is for the Below Ground Spouse. It sounds dumb but you won’t forget it.

The gift and estate tax exemption amount for 2017 is $5,490,000 and is indexed to inflation. Furthermore, when a married spouse dies, the survivor can add whatever is left of the dead spouse’s exemption to his or her own.

To change your trust, it’s easier to amend your trust by “restating” the entire trust document with an ordinary trust document that does not require an A/B split upon the first death. Doing a restatement also has the added benefit of bringing the entire document up to date with other changes in the law. It’s better than creating a new trust as you won’t have to transfer your home and other assets from the old trust to the new one.

You may want to keep the A/B trust the way it is if you and your husband want to restrict the ability of the surviving spouse to change things. This can be very important in blended families with children from prior marriages because while most spouses want to leave everything to one another, they still want their children to inherit it all in the end.

Len & Rosie

Dear Readers,

We would like to share with you something that we share with each of our trust clients. It’s really important, our clients like it, and we think that your family can benefit from it as well. You may have seen this in the column before. We print it year after year. Consider it as a gentle reminder to get yourself organized. One of the most tedious tasks in administering a trust or an estate is finding the decedent’s estate planning documents and asset information. Frequently, children or even spouses have no idea where important documents are to be found.

After you pass away, the last thing you should want is for your loved ones to have to search through your belongings to find your will, stock certificates, or other important papers. They shouldn’t have to lift up your mattress to look for your safe deposit box key. They shouldn’t have to wait a month for new account statements to come in the mail so they can figure out where you invested your savings.

To avoid these difficulties, you should organize your personal and financial data. This is where the list comes in. Collect the information described in this list and give a copy to your children or close relatives, or keep it somewhere safe and let your family know where to find it. In case something happens to you, the List of Eleven is one of the best ways to ensure that your relatives can find all your vital records.

The List of Eleven Plus One

1. The location of your safe deposit box, if you have one, and the location of you’re the key.

2. Account numbers for all of your insurance policies, health, life, auto, home, burial, etc., and the names and addresses of your insurance agents.

3. A list of your stocks, bonds, mutual funds, and the name, address and phone number of your broker.

4. The names of the banks or savings and loans for each of your accounts, and the account numbers, or even copies of account statements.

5. The location of your cemetery plot or mausoleum niche.

6. The location of your will or trust and the name of your attorney.

7. Your credit card numbers.

8. Your Social Security Number.

9. The name and address of your mortgage lender, the account number, and the approximate amount of the outstanding debt.

10. The name and address of your accountant, and where your past income tax returns are located.

11. The type of memorial or funeral service you want.

11+1. These days, many people receive account statements and pay their bills online, leaving no paper trail at home. It’s important for your loved ones to be able to access your email and online accounts so they can wrap things up when you are gone. You may want to provide them with a list of your account numbers and passwords.

If you think this is too hard to do yourself, consider how hard it will be for your children to deal with after you pass away. Take a few minutes to get organized.

Len & Rosie

Tillem McNichol & Brown