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Estate Planning Deficiencies Check-Up

Earlier this summer, I wrote about the importance of keeping your estate plan up to date. How do you know if your estate plan is up to date? In making this determination, there are several things you should think about. Here are a few of the key indicators.

First, do you have a will or trust?  This may seem like a silly question, but the reality is that the most common estate plan is not having an estate plan at all. In surveys, the reasons cited most often for not having an estate plan are the high cost of legal fees and the mistaken belief that only the wealthy need an estate plan. With regard to the former, it’s true that advice and services from a good estate planning attorney can be expensive, running anywhere from several hundred to a few thousand dollars. However, consider this: the AARP found that, nationwide, attorney’s fees in probate cases could total $1.5 billion a year. The fees and expenses of probate are paid not by you, but instead by the loved ones to whom your assets pass after your death. What’s more, if you do not have a will or trust, then state law determines how your assets pass, to whom they pass and when they pass, tying up your estate in probate court and possibly leading to your estate being consumed by creditors. The good news is that you can take control, and even avoid probate with a revocable living trust or other estate planning techniques.

Another indicator that your estate plan might need to be updated is if your will or trust has not been professionally reviewed within the last two years. The laws impacting your estate planning are constantly changing, as Congress, the courts and state legislatures are always busy rewriting the rule book. With the American Taxpayer Relief Act of 2012 (ATRA), Congress made major changes to the estate and income tax laws. Depending on your particular situation and the size of your estate, your will or trust might not account for these changes, potentially resulting in additional taxes and administration costs for your family.

Finally, if you have a will or trust, do the beneficiary designations on your retirement plans and life insurance policies align with the distribution of your assets as set out in the will or trust? Your choice of beneficiary can have significant tax consequences. Further, inadvertently naming a minor child or your estate as beneficiary (even as a secondary or alternate beneficiary), could lead to guardianship proceedings for the minor child or may subject the proceeds of your retirement accounts and life insurance policies to the claims of creditors in probate. Consulting with an estate planning attorney is the only way to be certain that you have made the proper beneficiary designations on your retirement accounts and life insurance policies.

These are just some of the indicators that your estate plan needs to be updated. If it has been a few years since you signed your estate planning documents, it’s a good idea to review them with a lawyer. Estate planning is not a one-time event. Rather, it’s the continual process of protecting what you’ve worked so hard to earn.