Estate planning has received some recent media coverage with the deaths of celebrities such as Robin Williams, James Gandolfini, and Philip Seymour Hoffman. In the case of James Gandolfini, the coverage focused on his failure to update his plan, which led to unnecessary estate tax liability, among other adverse consequences. The untimely deaths of these celebrities reinforces the point that your estate plan is likely to change over time. Generally speaking, an estate plan should be reviewed and, if needed, updated when your personal circumstances change or there are changes to the tax laws or other laws that impact estate plans. Your personal circumstances may change, for example, as follows:

• Your Last Will and Testament appoints guardians but the guardians are no longer practical since they are older or the circumstances of your children are different (e.g., the guardians are not local and it is important to have your children continue in their current schools).
• Your Last Will and Testament appoints an executor or trustee who no longer is a viable choice for this role. A trustee appointment can last for an extended period of time, and consideration should be given to whether an individual appointed as trustee can serve in this role.
• An executor, trustee, guardian, agent, or beneficiary may have died. Most estate plans account for the possibility of a pre-deceasing fiduciary by providing for alternate appointments. However, the alternate appointments may not make sense with the passage of time. Likewise, most Wills account for the possibility of a pre-deceasing beneficiary (the “per stirpes” language you see in your documents); nevertheless, an untimely death may prompt a client to re-think the disposition of his or her estate.
• A child is going through a divorce or a separation or financial difficulties. In this situation, you may want to update your estate plan to shield the child’s inheritance from his or her creditors.
• A child is very successful. If this is your situation, your plan may benefit grandchildren either directly or through a disclaimer by the child.
• You may have acquired real estate in another state. If so, you may want to consider owning the real estate in a Revocable Trust.

Changes in tax laws often lead to changes in estate plan documents. Most notably, the federal estate tax law has changed significantly over the last fifteen years. In 2001, each person could exempt up to $675,000 of property from estate tax at death and your exemption amount could be “wasted” by transferring your property directly to your surviving spouse instead of to a trust for his or her benefit. Currently, the exemption amount is $5,340,000 per person and a decedent’s unused exemption amount can be carried over to a surviving spouse. Under the current law the exemption amount will increase annually based on inflation. Common themes for updating estate plans are as follow:

• If your estate plan was prepared between 2001 and 2009, it may incorporate “Disclaimer Trust” planning that may no longer be necessary. Disclaimer Trusts were utilized to address the uncertainty surrounding the amount of property transferred at death that could be exempted from the federal estate tax (the estate tax exemption amount increased between 2002 and 2009 to $3,500,000 but under the law at that time the exemption amount would decrease to $1,000,000 in 2011). Most clients now have no realistic expectation of estate tax exposure due to the increased estate tax exemption amount is $5,340,000 and portability. As a result, you may not want to continue with this type of plan.
• Other clients may have “pour over” Wills and Revocable Trusts that also were prepared when the estate tax exemption amount was much lower. These documents may over-complicate the estate plan given the current tax laws. These plans also rely on spouses owning assets separately.
• “Disclaimer” plans and “Pour Over” plans incorporate separate ownership of assets by spouses. Separate ownership of assets requires the administration of an estate when the first spouse dies. If there is no need for these types of plans, then assets should be jointly titled to avoid the costs and inconvenience associated with settling an estate.
• Some clients may have established an “Irrevocable Life Insurance Trust” to mitigate estate tax exposure. In general, the trust avoids estate tax on the death benefit of the life insurance policy owned by the trust. Clients may consider terminating the trust or reducing the face value of the policy owned by the trust in order to save on premiums.

It is important to remember that every client’s situation is unique and that no two estate plans are alike. The tax laws are always changing as are your personal circumstances. A periodic review of an estate plan generally is a good investment to ensure that the plan fits your current needs and the current tax laws.