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Trusts and Year-End Planning: A Checklist

| December 01, 2023

A trust is a legal vehicle that protects your assets and contains instructions for your assets when you die or become incapacitated. When you set up a trust, you transfer assets from your name into your trust's name while still retaining control of the assets until you die.

Trusts can hold many different assets, such as cash and bank accounts, real estate, securities, ownership interests in business entities, and other investments. For purchases you want to preserve and transfer, it's essential to list them in a trust so they can avoid going through probate, a court process to transfer your assets retroactively, which can be expensive and public.

The end of the year is a great time to review your trust document, update information, buy or sell assets, or even cancel your trust. Here is a checklist to help you complete your trust and year-end planning:

Review and update your trust document- Keep a copy of your original and the latest trust documents for your records. Update any changed information, including if you designate a new trustee. Your legal professional can assist you in updating your trust documents before the end of the year.

Complete annual record-keeping duties- Recordkeeping may involve professionals to help ensure the trust is administered correctly, minimizing taxes, distributing capital gains to beneficiaries, and so on. Prepping for filing taxes is easier when recordkeeping duties are completed at the end of each year. Here are things to review, determine, and do before the end of the year:

  • Payments made on behalf of beneficiaries and receipts
  • Net income paid to beneficiaries
  • Payments made to third-party payees
  • Review the past year's tax records
  • Make tax payments due before December 31st
  • Make interest payments due before December 31st
  • Other payments due
  • Determine capital gains
  • Estimate taxes due

Financial, legal, and tax professionals can help you with annual-record-keeping duties so your trust operates compliantly.

Review ownership of assets- You may have sold or purchased new holdings during the year. Ensure your trust document has the correct items and that the trust is the owner, not an individual. You may need to update the titling on some of the assets in the faith, such as a home, cars, and other fixed assets.

Review and update beneficiary information- Your beneficiary information must be kept up-to-date since marriages, divorces, name changes, or other life events can occur. Make sure to review beneficiary information on these specific items:

  • Life insurance
  • Employer-sponsored retirement savings accounts
  • Bank and brokerage accounts
  • Annuities

Review disability documents- If you become disabled, your trust document directs your care through these essential disability documents:

  • Power of attorney- lists who will manage your financial affairs if you cannot do it yourself.
  • Medical directive- lists how you want to be medically cared for if you cannot make medical decisions yourself.
  • Guardianship document lists who will be the guardian of your children or you if you become incapacitated.

Review life insurance contracts- Review your life insurance contracts to ensure the death benefit is appropriate for your situation. Also, review the details of each contract, such as when it ends, if it is a term life policy, or the cash value accumulation if it is a whole life insurance contract. Also, double-check the beneficiary information to ensure it is accurate.

As you complete your year-end planning, rely on your financial, legal, and tax professionals to help answer questions or prepare your trust documents for next year.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information does not substitute for specific individualized tax or legal advice. We suggest you discuss your situation with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

All information is believed to be from reliable sources; however,, LPL Financial does not represent its completeness or accuracy.

Fresh Finance prepared this article.

LPL Tracking #1-05326016

 

Sources:

https://www.estateplanning.com/understanding-living-trusts

https://www.lincoln.edu/ways-give/major-planned-gifts/year-end-estate-planning-checklist.html