Just like you change the batteries in your smoke detector on an annual basis, you should also review your estate planning on the same cycle. All too often people don’t review their plans ahead of time or keep them up to date based on the changes that have occurred over the past year. Everyone has things change in their life on an annual basis. And your estate plan should be a “living, fluid plan” that moves with you as your life changes.
You might have had another child and need to update your beneficiary statements, guardianship intentions, and a variety of other areas related to children. Or you could have gotten a divorce and need to reallocate your assets to other people. Or someone could have passed away and now there are changes affecting this event. Or someone got married and now they have moved from an individual to a group of assets and issues. Regardless of what the year held for you, it’s a great idea to review your estate plan on an annual (or more frequent) basis.
Even with the doubling of the individual estate gift and GST tax exemptions to about $11.2 million per person (and double the amount for married couples), you still need a will, says Forbes in a useful article titled “7 Reasons to Revisit Your Estate Plan, Trump Tax Law Aside.”
Having a will serves as the primary vehicle to convey your intentions for your assets and explain your legacy. The provisions of the will can be used to designate how assets will be transferred, whether outright to beneficiaries, to existing trusts, or into a new trust that is created under the provisions of the will. If you use a will to create a testamentary trust, the will is where you specify the age for distributions to the beneficiaries and other important details. The will is also used to convey your wishes to make a gift to specific institutions and who should receive family heirlooms, for example.
The executor, or personal representative, of the estate is the person or institution in charge of managing your affairs after you have passed. The executor gathers all the information about your estate, including assets and debts, filing taxes, and administrative tasks. That person is named in the will.
If you have minor children or a child with a disability you will want to choose a guardian and a successor guardian. If you don’t make your own designations, the court will appoint someone to raise your child(ren). Unfortunately, the person the court selects might not be the person you would have wanted. While your spouse is usually the obvious choice, there are instances where both parents die unexpectedly and don’t have any plans in place for their children. This can be catastrophic to your children to those surviving.
There are many different types of trusts used to accomplish different things. They can be used to control assets and their distribution, which is particularly important when minor children are in the family. Trusts should be used when there is an individual in the family with a disability, an addiction, or other issues where certain people can’t manage their finances on their own.
Tax planning is another major part of any will. For many years estate planning attorneys focused on how assets were titled. They did this so that the first of a married couple to pass would be able to fully use their estate tax credit. However, with the relatively new concept of “portability,” this change allows any unused credit from the first spouse to pass to be used for the benefit of the second spouse. It also eliminates the need for any unused estate tax credit to go into a bypass trust.
As you can see, things can get a complex quickly to deliver on the promises you want to make to your loved ones. Everyone needs a will. And if you have a will in place, make this year the year you review it to make sure it will carry out your wishes the way you want. This is where an experienced estate planning attorney can be one of your best advisors. They can get you on the right path to deliver the wishes you have for your loved ones. And while the new tax law may have eliminated or reduced some estate tax liability, it hasn’t eliminated the need for mindful and proactive estate planning.