With changing tax laws, regulations, life circumstances and economic environments, estate plans can easily become outdated. As such, they should be viewed as fluid documents, rather than an unchanging concrete plan.
While a thorough assessment of an estate plan is encouraged yearly, these eight items should be kept top of mind when considering if it’s time for a refresh.
1. Have tax laws changed?
The 2017 Tax Cuts and Jobs Act (TCJA) made significant changes to both individual income taxes and the estate tax. This tax law caused a dramatic change in the landscape of estate planning whereby many shifted their focus away from estate tax planning to more income tax planning.
Since many people still have estate plans that were created before these changes were enacted, higher exemption amounts may result in unintended consequences. Higher exemption amounts may affect married couples relying on traditional marital-non-marital trusts and planning designed to address potential estate tax liability that no longer exists for many while ignoring income tax planning opportunities.
2. Have marital laws been updated?
In 2013, the United States v. Windsor court case opened the door for federal recognition of same-sex marriage. In 2015, the recognition of same-sex marriage became mandatory across all 50 states offering new planning opportunities for these couples. In 2022, senators have introduced the bipartisan supported Respect for Marriage Act‡.
This act protects marriages by demanding individuals to be considered married in any state, providing marriage was already considered valid in the state it was performed in. Additionally, this act preserves marriage equality for all individuals.
3. Is the family dynamic different?
Much can happen over time in a person’s life. Marriage, divorce, new kids, loved ones passing away or becoming responsible for an individual with special needs. Any change in circumstance is an ideal opportunity to revisit an estate plan—especially when a person needs to be removed from a plan because of either death or divorce.
4. Has there been a move?
Moving can impact tax rates, tax types, probate laws and potentially available trust laws. In addition, some states are community property states, while others are not. The expansion of decanting—amending an irrevocable trust by pouring it into a new trust document—has created an opportunity to revisit some of these issues, even for irrevocable trusts set up in years past.
5. Are beneficiary designations balanced?
Beneficiary designations are typically used to both identify the individuals you wish to benefit but also to avoid the probate process. These designations must be reviewed periodically to make sure they are in harmony with the overall estate plan. In addition, while state law may correct an estate plan in the event of divorce or marriage, it might not update, for example, an individual retirement account (IRAs) beneficiary designation.
6. Is the financial picture current?
An individual’s portfolio makeup is dynamic and changes over time. The addition of real estate or a business to a portfolio, for example, means making certain a trustee, durable power of attorney or a personal representative knows and is empowered to carry out wishes regarding succession or sale.
7. Have charitable intentions changed?
Is there desire to add a charitable gift or a new cause to the plan? Have charities named in your plan changed identity or split up? Are charitable beneficiaries properly identified? Now is the time to make those designations to ensure wishes are fulfilled.
8. Has due diligence been done?
Review estate plans to make sure it still aligns with your goals and objectives, any necessary funding steps have been completed, assets are property titled, and any necessary changes have been made.
Reviewing an estate plan may seem like a daunting task, but it’s one that is necessary to ensure the plan will work as you intend for the benefit of you and your family. With the partnership of your trusted team of legal, tax and financial advisors, an updated estate plan is the best way to ensure your wishes are clearly stated and your plan achieves your goals.
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