Top 5 Reasons to Update Your Estate Plan
If you have an estate plan, congratulations: you are way ahead of most people in terms of protecting your legacy and giving your loved ones peace of mind. By some estimates, nearly half of all American adults lack even have a basic will. Consequently, millions of families every year will incur unnecessary taxes as well as attorney fees from probate. All that said, just because you already have an estate plan does not mean you can rest on your laurels. Estate planning is an ongoing process. Your will, living trust, durable power of attorney and other documents must be refined and amended over time so that your wishes are carried out after you are gone. Here are the top five reasons to update your estate plan:
- You got married – The tax code treats married couples differently than single individuals. Did you know that you can leave your entire estate, regardless of size, to your spouse free of any federal estate taxes? In addition, getting married will likely change how you plan for the possibility of incapacity, such as Alzheimer’s or stroke.
- You had a child – Minors cannot legally own property. Therefore, it is vital that your will and/or living trust contains adequate provisions to ensure an inheritance does not pass outright to the minor child. Otherwise, an expensive and intrusive guardianship proceeding could be required.
- You got a raise – As you progress in your career, hopefully you are making more money. Obviously, everyone wants a raise. However, with increased income and wealth often comes the need for more extensive estate planning.
- Congress changes the tax laws – A few years ago, Congress drastically altered our nation’s tax laws with the American Taxpayer Relief Act (ATRA, for short). ATRA increased the exemption for federal estate taxes to $5.25 million, indexed for inflation (in 2016, the exemption is $5.45 million). While that brought some certainty to estate planning attorneys and their clients, things can always change. If you follow the news, it may be difficult to believe that anything gets done in Washington. Yet, the fact is Congress actually does pass new laws on occasion. In the event Congress tinkers with the federal estate tax again in the future, it could render estate plans crafted around ATRA obsolete. A good rule of thumb: if your will or living trust is more than three years old, you should at least review it with an estate planning attorney.
- You recently retired – If you recently retired, or are thinking about it, now is a good time to reevaluate your finances, including estate planning. As we age, the possibility of long-term care becomes more acute, and certain estate planning tools can preserve assets for your family from Medicaid and nursing home costs.
An estate plan is like a car: if you do not perform regular maintenance, it breaks down. You made an investment in your future by planning your estate. Do not let that investment go to waste by neglecting necessary changes.