Dear Clients and Friends,
By some accounts, 70% of adult Americans do not have any formal estate planning documentation - such as a Will or a Revocable Living Trust. If you have at least gone to the trouble of doing this, consider yourself ahead of the curve and pat yourself on the back. Then come back to us and understand that your work is not completely done. A will or living trust is not a static instrument. To serve its purpose, it must be keep current with life changes including an individual’ s financial circumstances along with some external factors, such as tax laws. With our help you should periodically review your will or trust, staying alert to new or different circumstances that might call for updates.
Marriage, Divorce, and Remarriage
Obviously, a marriage usually brings a new beneficiary into the picture, and a divorce may remove one. Some of the changes in a will or trust prompted by a change in marital status may not be so apparent. For example, when a widow or widower remarries the will or trust may need to be updated to show how children from the previous marriage and the new spouse are to be provided for.
Additions and Subtractions
A new child is a new beneficiary, but a will or trust can and should cover more than just the distribution of property to heirs. Parents can name a guardian, and even an alternate guardian, to care for their children in the event that something happens to both parents. Absent such a provision in a will, a court will appoint a guardian.
The death of an executor, guardian, beneficiary, or trustee creates a gap in how the will or trust is supposed to operate. Fill in the gaps by making necessary changes, such as naming a new individual or, in the case of a deceased beneficiary simply removing him or her from the will or trust.
Changing Fortunes
If you enjoy an unexpected windfall, you may still want the larger pie divided up as before. But it is likely that some changes in your will or trust will be called called for. If the increase in the potential estate is large enough, it might trigger the need for planning to avoid or minimize estate taxes. A reversal of fortune could also suggest some changes. For example, you may have to revise downward that fixed sum you were planning to leave to a favorite charity.
Moving Out of State
You will not have to start from scratch if you move to another state, because all of the states recognize a will that was properly created in another state. Nonetheless, legal advice should be sought in the new state because changes in the law from state to state could require some corrections in your will or trust documentation.
Changes in Tax Laws
The government’ s intentions can change even if your intentions have not. Some of the changes benefit individuals with wills or trusts, but you can take full advantage of them only if you are aware of them. The big item here is in changes to the federal estate tax exemption, which is the amount an estate can reach before it is subject to an estate tax. In recent years the exemption has headed up, but there are no guarantees about what Congress will do with the exemption going forward.
You Change Your Mind
If you decide you want to change beneficiaries, a guardian, a trustee, an executor, or anyone else in a will or trust, you can do so. For example, you want to make sure that the beneficiaries in your will are the same as the beneficiaries you have named in your insurance policies and retirement accounts. Otherwise, the beneficiaries actually named in those documents, not the beneficiaries under the will or trust, will get the money from the policies and accounts. Bear in mind that no amount of talking about your new intentions will make them happen. The changes must be indicated in a properly executed document.
You should keep the finished (at least until the next update) product in a safe place. When “ they” say “ keep this with your important papers,” think of your will or trust. Your family should know where to find the executed document.
We continue to provide a free phone evaluation on all of your estate planning questions and we look forward to your inquires.
Best,
Ron
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