As families gather for vacations or to mark milestones passed during the year, it is a good time to take stock of their estate plans and, in particular, to review any trusts created during a family member’s lifetime or at death.

Families often have an assortment of trusts, created during different stages of their lives and designed to serve various purposes. Typically, they have not looked at them in a while.

Meanwhile, children have grown up, senior family members have matured, tax laws have changed and investments have prospered—or diminished in value.
If estate planners don’t stay on top of these types of changes, problems can occur. Perhaps assets appreciated so rapidly that beneficiaries are in danger of becoming financially dependent on income distributions from a trust. Or maybe there is a risk that individuals with no financial acumen will dissipate age-based payouts they are about to receive.

Many trusts are irrevocable, meaning that the grantor—the person who created them—cannot change their terms. However, depending on the provisions of the trust, the trustee’s powers and state law, there may be strategies to administer them more flexibly.

When individuals do extensive planning over many years and use different lawyers, they can end up with a patchwork quilt of trusts. Ideally, old trusts that were put in place incrementally complement one another. An inventory of old trusts should also be a prelude to drafting new ones.

Here are some common trouble spots that can arise when trusts aren’t updated:

Distribution ages are earlier than you would prefer. Take the couple that set up trusts for each of their three children a dozen years ago and specified that half the principal should be paid out when the children are age 30 and the rest at age 35. Since then, they have discovered the asset protection and other benefits of lifetime trusts. They would prefer that their children not receive large sums of money that might be squandered at a young age or fall into creditors’ hands. Moreover, they desire to ensure that the trust property passes to their grandchildren.

Sometimes, especially when trusts are funded with stock in an early-stage company, the assets appreciate more dramatically than anyone anticipated. When that happens, and the trust requires distributions at specific ages, there is a risk of substantial wealth going to beneficiaries before they are ready to manage it.

There are several strategies to consider in situations like this. One option is not to put any additional money into the trusts and instead create new trusts with extended distribution terms for any future transfers. Another choice may be to rely on the terms of the trust and state law to enable the trustees to distribute the trust property to different trusts for the benefit of the beneficiaries with a stretched-out distribution schedule.

Another popular solution is to create a limited liability company or a limited partnership—funded with other family assets—and have the trust invest in that entity. The trust would then own a percentage of the partnership. Instead of receiving property outright at the designated age—assume it is 21—the beneficiary would receive an interest in the partnership. That partnership interest, in turn, would entitle him or her to an income stream, though not nearly as much as the beneficiary would have received. Additionally, the trust, as a limited partner, would have no control over the underlying entity.

Whether a trustee can employ any of these strategies will depend on the terms of the trust and state law. Sometimes it may be necessary for the trustee to present the plan to the courts or obtain consents from beneficiaries to better meet the grantor’s wishes.

It no longer makes sense to retain assets in trust because of tax law changes. Fewer people are subject to estate tax now that the federal exemption has risen to $5.34 million ($10.68 million for a married couple). Meanwhile, federal and state income tax rates have risen and trusts are taxed at the highest marginal rates when income exceeds only $12,150 for 2014.