Many people asked me whether a living trust or an estate plan is entirely done by making it once in a lifetime. However, in most cases, a living trust should be corrected and updated once or twice when the situation after the grantor's death differs from when the living trust was made.
A trustor uses a living trust to manage the estate that a beneficiary will inherit through a trustee. Generally, when an estate owner is alive, the owner takes care of the estate as a manager. However, when the owner cannot manage the estate because of serious medical issues or death, a living trust makes it possible for a secondary manager to manage the estate. This secondary manager is called a successor trustee. The successor trustee will take charge of the estate execution after the trustor's death. In general, the parents, as estate owners, are the original trustees and assign their children as successor trustees. Let's say their relatives are assigned as successor trustees because their children are under 18. When the children become adults, the living trust must be corrected to transfer the successor trustee into their children. This is because if the parents die while their relatives are the successor trustees, the relatives will control the estate execution process—it is likely to delay the estate execution or cause potential conflict with the children, the beneficiaries.
When any change happens in the list of your estate, you should correct or update your living trust accordingly. If you purchase real estate after making a living trust, you should not miss the procedure to transfer the real estate into your living trust. A living trust is a private document. In other words, public offices are not aware of the contents of your living trust, so the ownership of your new real estate will not automatically transfer into your living trust. That is to say, if you did not make a purchase agreement on an apartment in your living trust's name, you should register it in your name first and then transfer its ownership into the living trust. If you do not transfer the ownership into the living trust, the apartment will not be listed in your living trust. Then, your children must go through a probate process to inherit it. Occasionally, some people do not make a living trust but transfer their real estate into a living trust as if they had already made one. It is like loading stuff even before making a wagon. So, only after making a decent living trust should you transfer your real estate into your living trust.
Also, when the estate law changes, the living trust must be updated or corrected. The gift and estate tax exemption amount has been changed every year. Because of this change, you may have unnecessary or inappropriate terms in your living trust according to the current estate law. In the past, many married couples transferred their estates into each spouse's living trust to maximize their estate tax exemption amount. This method is usually called "the AB living trust." However, a few years ago, the estate law was updated, so the estate tax exemption amount of the deceased spouse can be used along with the living spouse's when the living spouse deceases. Also, the amount of estate tax exemption has been increasing continuously. Accordingly, if a married couple does not have to worry about the estate tax, the AB living trust no longer needs to be used. Even if you have already made an estate plan or a living trust, you should thoroughly check whether it reflects the current estate law, whether it includes all of your real estate, and whether the successor trustees should be updated.