Four Signs it’s Time to Update Your Estate Plan

Feb 18, 2020

Everyone has an excuse for putting off a visit to their estate planning attorney. An appointment with your attorney may force you to make difficult decisions, can be expensive, and may evoke fears of death. However, having an effective, up-to-date estate plan is vital to achieving your multi-generational wealth transfer goals. It also plays a key role in minimizing federal and state estate taxes, decreasing the need for public court proceedings (e.g., probate), and avoiding or reducing potentially inflammatory family situations. While a visit to your attorney comes at a cost, dated or out of touch estate plans can be much more costly. The following four signs indicate that it may be time to schedule a visit with your estate planning attorney.

Tax Laws Have Changed

Federal and state estate tax laws have changed substantially in the last several years. For example, the amount an individual can exclude from federal estate taxes has ranged from $2 million to $11.58 million (i.e., the current 2020 exemption) over the last 15 years, with a short stretch in 2010 where federal estate taxes were repealed. Likewise, the federal estate tax rates have ranged from 0% to 46% over the same time period. Furthermore, recent legislation made the amount that can be excluded from estate taxes portable between spouses—effectively simplifying estate tax planning for a large portion of the population. Many states have either repealed the estate tax or made significant changes. In New York, 2014 legislation put a schedule into motion to increase the state estate tax exclusion amount from $1 million to now $5.85 million in 2020.

In addition, with the recent passage of the SECURE Act, which made substantial changes to the distribution schedule of inherited retirement accounts, it will be important to review your beneficiary designations in the context of both your current estate plan as well as your beneficiary’s personal and financial situation to determine whether any changes to your beneficiary designations may be necessary. This is especially important if your retirement accounts will be used to fund a trust (e.g., Credit Shelter Trust, Family Trust, Generation Skipping Trust, Supplemental Needs Trust, etc.) upon your death.

Your Goals Have Changed

As you progress through life, your estate planning goals are bound to change. Initial goals may focus on providing for your spouse and/or kids in the event something were to happen to you. As your wealth grows, minimizing estate taxes may become more of a concern. Also, where you grow older or asset protection/health care planning could be an important consideration. Finally, over your lifetime, your desire to be charitable and your favored charitable causes may change. It’s important to ensure your estate plan is structured to meet your current goals.

Your Life Has Changed

There is a good chance meaningful life events have taken place since you last reviewed your estate plan. For example, children or grandchildren have been born, you/your spouse/a family member have had a significant medical event, you or one of your beneficiaries have gotten married or divorced, important people have entered or left your life, you have retired, moved to another state, you have purchased or sold real estate or a business, etc. Life changes can have a profound impact on how you choose to structure your estate plan. You should, at a minimum, review your plan after any significant life event.

Your Circle of Trust Has Changed

Among the important decisions you have to make when drafting an estate plan is the decision of whom to appoint to make important financial and/or medical decisions on your behalf in the event you become incapacitated or pass away. You must name executor(s) of your will, choose trustees for trusts, appoint potential guardians for minor children, and name agents for health care proxies, powers of attorney, and living wills. While your spouse may be the obvious first choice to serve in those roles, it is important to also name successors in the event your spouse predeceases you and/or is unable, for any reason, to act in that capacity. The people you feel confident naming to serve in a fiduciary capacity are likely to change over time. Given the important role each of these individuals serves, it is important to review them and update them as necessary. Estate planning is just one of the many areas of financial planning that Manning & Napier’s Family Wealth Management team can review for clients.

Learn more about the importance of estate planning regardless of age or stage in our Estate Planning Guidebook. It offers estate planning recommendations at a variety of life stages and shares some strategies you may want to consider.

Consult with an attorney or a tax or financial advisor regarding your specific legal, tax, estate planning, or financial situation. The information in this paper is not intended as legal or tax advice.

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