When to Tune Up Your Estate Plan

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Schwabe, Williamson & Wyatt PC

Life is not stagnant; situations change and evolve. Your estate plan should reflect your current status and expected future status and desires. There are many life changes and developments that might warrant an update, which is why it’s important to periodically review your estate plan with your lawyer. Below, we’ve a list of questions to help determine if it’s time for a tune-up.

Federal Changes

  • Have federal estate tax laws changed since your last estate plan was drafted?

Federal estate tax gift and estate tax exemptions have changed in the past few years. If your estate plan was written prior to these changes, a tune-up might be in order.

  • Are federal estate tax law changes on the horizon?

Changes in presidential and congressional leadership might signal future changes in the law. You should determine if there are current tax saving strategies you want to implement before the new changes take effect or if it would be better to wait until the new laws are in place.

Marital Status

  • Has your marital status changed since your plan was created?

Changes in marital status can influence how assets are transferred after someone has died. Marital status changes can include marriage, as well as divorce, formalized separation, or even widowed status. If a change is accompanied by a settlement, there might be compliance issues to consider, such as whether an ex-spouse must be included on an insurance policy or how to treat alimony payments after death. In addition to reviewing your current estate plan, any documents with beneficiaries such as insurance policies, retirement plans, and 401(k) plans should also be reviewed. Changes in marital status could include other details that should be discussed with your lawyer to ensure that your estate plan reflects your wishes.

  • Have you signed a prenuptial agreement?

States have varying presumptive laws. These laws could be inconsistent with your desired estate plan. To ensure that postmortem stipulations in a prenuptial agreement are carried out, the agreement and the estate plan should be reviewed by a lawyer who is admitted to practice within that state.

Children, Grandchildren, & Dependents

  • Have you welcomed children or grandchildren to your family?

New additions to your family, such as children, grandchildren, and adopted children, whom you want to provide for might require an estate plan tune-up. Children might also require guardianship designations, and new additions to the family could result in asset shifts as well.

  • Have you added college funds for children or grandchildren to your estate plan?

You can establish a trust to fund college or other education expenses for your children or grandchildren in a trust or will. In addition, you might want to look at establishing or contributing to an established 529 plan for a child or grandchild.

  • Have any of your children reached adulthood?

When a child turns 18 and becomes an adult, does this affect how you want to allocate your assets? Adult children might warrant different estate plans, such as trusts. It is also best to be specific and stipulate at what age you feel it is appropriate to release inherited funds. Estate plans can even be created that stagger the release of funds over time.

  • Has a child changed their marital status?

If one of your children marries, divorces, or separates, this could affect how you choose to distribute your assets. You might want to remove ex-spouses if they were named in your estate plan.

  • How do you want to handle unpaid loans to your children?

If you have lent money to children, or even grandchildren or others, your estate plan should reflect how this loan should be treated if it is not paid back prior to your death. Is the loan forgiven or is the outstanding debt used to calculate that person’s portion of the assets?

  • Are there new dependents who should be added, such as aging parents or children returning to the home?

Any new dependent whose care you want to provide for after your death should be added to your estate plan.

Assets & Ownership

  • Have there been significant changes to your net worth, either increases or decreases?

Substantial shifts in your net worth may require estate plan tune-ups. If your estate has grown to over applicable federal and state estate tax exemption amounts, it is subject to those estate taxes. Provisions should be in place to manage tax implications. Conversely, if your estate value has dropped below the threshold for applicable estate taxes, the tax management structures in your estate plan can be relaxed.  

  • Have you acquired a vacation home or other new properties?

Reviewing and updating deeds and considering trusts and other entities for ownership might be warranted to ensure that property is handed down to whomever you wish. Another issue to consider is whether the new property is in another state than the one you live in. The laws in that state need to be understood when planning to hand down property to others.

  • Do you own or have you started a new business?

Business ownership and its succession require consideration in an estate plan, along with other tax and business planning. Most of this planning needs to be done well in advance of any exit, whether planned (like a family or employee transfer plan or sale of the business) or unplanned (death or disability). Remember that your business transition and estate planning need to be aligned to get the best results. Your plans should clearly stipulate succession, whether it be to a family member or to a non-family member.

  • Do you own life insurance?

If you have purchased life insurance since your last estate plan was drafted, it is important to note that the value of this asset is calculated in the value of your estate and could significantly affect your estate plan.

  • Do you have a retirement plan, IRA, or 401(k) plan?

Remember that the beneficiary designations in any of these plans supersede directions that are given in an estate plan. It might be necessary to review the documents to make sure they communicate your beneficiary wishes.

  • Are you know receiving income from a trust?

Depending on the amount received, this income could have effects on your estate taxes. It might be worth reviewing with your lawyer to determine if it is better to redistribute this income to a beneficiary.

Gifts & Donations

  • Are you planning to make a charitable donation upon your death?

Many people add charitable bequests to their estate plan later in life, once their children are grown or the value of their estate allows it. These donations need to be specifically added to your estate plan and cannot be added by an executor after your death.

  • Since you last updated your estate plan, have you received any inheritance or large gift?

Any significant changes in the value of your estate might necessitate new considerations on how the estate’s assets are allocated. It might also affect your beneficiary’s estate taxes.

Home & Health

  • Have you moved to a different state since you last updated your estate plan?

If you have moved to a new state, your estate plan might need to be updated to take into account any differences in state laws. Your new state might differ in the regulations around powers of attorney and other matters.

  • Have any of your beneficiaries passed away since you last updated your estate plan?

If any of your beneficiaries are now deceased, and you have not already accounted for their passing, your estate plan should be updated to ensure your assets are passed down according to your wishes and not to others outside of your plan.

  • Are you or your spouse now incapacitated or seriously ill?

If you or your spouse are incapacitated or dealing with a serious illness, it is important to make certain that your powers of attorney are up to date. Special need trusts to ensure that incapacitated or ill spouses are cared for can be created by working with your lawyer.

Executors, Guardians, and Powers of Attorney

  • Do your executor, guardian, or attorney-in-fact designations need to be updated?

Are all the people you have designated to help manage your estate plan, including executors, guardians, and attorneys-in-fact, still willing and able to serve in their designated roles? If any one of these people have passed away, fallen seriously ill, moved, or are unwilling to perform their duties as laid out in your estate plan, a tune-up is in order.

It is particularly important during these uncertain times to make sure your estate plan is updated. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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