Tax laws are ever changing, and they are likely to significantly change in 2025 with the new administration in Washington. Do these changes make your Will or Trust invalid? No! However, amendments to the Will or Trust may be needed to comply with the new laws or may be needed to make sure you get the most benefit from the new laws.

Changes You May Need to Make with Changing Tax Laws

Just a few years ago, the estate tax exemption was only $600,000. Since that was the figure for many years, estate plans established Bypass Trusts specifically referring to the $600,000 exemption. In 2017, the exemption rose to $5.49 million. A typical tax planning Will or Living Trust calls for the exemption amount to be placed (at death) into Trust for the surviving spouse and children, with the balance left outright to the spouse or in a separate “Marital Trust.” With the exemption amount rising, your entire estate could end up in the Trust, even if this is not what you intended and even if it does not achieve the intended tax results. Make sure your Will or Living Trust is flexible on that point, allowing for the annual increases based on a percentage of the estate and not a specified amount. Or the surviving spouse can be given the right to decide how much to place into the applicable Trust using the “disclaimer” technique.

The “Disclaimer Trust” technique allows the surviving spouse to decide how much to place into the Credit Shelter Trust within nine months after the other spouse dies. The decision can be made based on the tax law as it exists at that time.

The “QTIP Trust” offers another potential solution to the changing estate tax laws: it permits the Executor to decide how much of the first decedent’s exemption to apply to the Marital Trust, of which the surviving spouse is sole beneficiary for life.

If you and your spouse have large estates, you could have the opposite problem of a Will or Living Trust document that does not stipulate that the Credit Shelter Trust will be funded with the larger exemption amount. In this case, adjustments would be needed to take full advantage of the increased exemption amount.

Using a Special Co-Trustee

Another way to give your Living Trust or Trusts created by your Will the flexibility to adapt to changing tax laws is by appointing a “Special Co-Trustee” or “Trust Protector.” This person would be unrelated to you and should be unbiased. Additionally, a Special Co-Trustee can be given the power to amend the Trust to cover unforeseen circumstances and law changes.

And what about changes in circumstances? When you create a Trust, you may intend to give equal shares of the estate to each of your children. However, years later, this may not be the best thing. The Special Co-Trustee can adjust your plan to respond to these changing circumstances.

Estate planning is not something you do once, tuck away in a file, and forget. It is something that needs to change with the changing times, circumstances, and laws so that you can accomplish the goals you originally set out to accomplish.

One of the main reasons for reviewing your estate plan is the changing tax laws. These tax changes are not the only reasons, however, to review your plan. Here are nine others:

  1. Change in Residence. Each state has differing laws. Therefore, if you move to another state, you will want to be sure that your Will or Trust uses the state laws to your advantage.
  2. Change in Assets. When your assets change significantly, you may be able to employ different estate planning tools.
  3. Inheritance. If you or your spouse have received or expect to receive a significant inheritance, there may be new opportunities to reduce taxes or provide creditor protection.
  4. Changes in Non-Tax Laws. Some laws are created that affect the dispersal of property and/or how your Estate or Trust may be managed.
  5. Change in Desires. As your desires change, you will need to revise your estate plan to match the new desires.
  6. Illness. Those that are ill often have special needs. You may want to change your Will or Trust to accommodate these special needs.
  7. Birth or Adoption of a Child. As you acquire a family of your own, you will find that you want your assets to be divided differently.
  8. Divorce. A divorce can radically alter your Trust since often a Trust is Co-Trusteed with both spouses.
  9. Marriage. Marriage does not automatically change your Will or Trust to provide for the new spouse.