By Robert E. Fravel, Esq.
When was the last time you reviewed your estate plan? If you can’t remember, or the answer is “when I went over them with my attorney before signing”, that may need to change. Due to ever changing life events and tax laws, you should review your plan every 3-5 years to help maintain the plan. In this article I’ve put together a list of common mistakes in an outdated estate plan. If one or any of these situations apply to you, then it may be a good idea to sit down with your estate planning attorney.
- Communicating with your beneficiaries: Do the beneficiaries in your estate plan know what you intend to leave them when you die? Have you given them the names of individuals they should contact in the event of your death (attorney, trustee, insurance agent, etc.)? Handling these issues ahead of time will make your estate administration much easier when the time comes.
- Review your life insurance policies: Is your policy still competitive with the current market? If you are the policy owner, does it still make sense for you to be the policy owner or would it make sense to have it owned by a trust?
- Maintain your philanthropic goals in your estate plan: If you are someone who has a desire to give back to the community during life, don’t forget to include that passion in your estate plan. There are many ways to include charitable gifts in your estate plan, and more often than not, those charitable gifts in your estate plan will come with tax benefits and potentially increase the net amount you pass on to your other beneficiaries.
- Is the tax saving strategy still relevant? Notorious B.I.G. hit the nail on the head with “Mo Money Mo problems”. With more wealth comes more tax issues – not only income tax issues, but also gift tax and estate tax issues. In 2021 the federal estate tax exemption is $11.7 million. This means that upon their death, a citizen may transfer up to $11.7 million (double for married couples) via their estate plan or intestacy, free from federal estate tax. But this was not always the case. In 2001 the federal estate tax exemption was $675k. and over the next 20 or so years it rose steadily (except for 2010 – when there was no estate tax at all). My point is, if your estate documents contain an estate tax savings plan that was prepared a number of years ago, it may be outdated and may not be appropriate for your situation anymore.
- Your children have grown up: When you have young children, a key aspect of an estate plan is naming a guardian. But if your child has now grown up, it is very likely that a guardian is no longer necessary. But there may be other factors to consider: Is your child financially responsible? Do they have any judgments against them? Are they married? Have children? As these new situations arise, they should be properly addressed in your estate plan.
- Are the right people still named as your Executor/Trustee? Executors and trustees are those individuals (or corporations as well) who have been appointed to take control over assets (executor controls estate assets/trustee controls trust assets) for the benefit of others (beneficiaries). Executors and trustees are both generally appointed within their respective estate documents – executors are appointed in wills and trustees are appointed in the trust (which can also be set up within a will, but that is a conversation for another time). Executors/trustees should be people whom you trust. Not only are they responsible for managing assets, but they also have to pay debts and handle tax filings. Take some time to review who you appointed for these positions. It is possible that these appointments may need to be adjusted over the years as well.