How to Know Your Estate Plan is Current

Not having an estate plan comes at a significant risk for every single person, regardless of wealth, age, or life circumstance. Everybody’s estate plan may look different. It’s important to be sure your estate plan is tailored to your circumstances. Having an estate plan that is not current–meaning, it does not reflect your current wishes or address your current life circumstance–is as detrimental as not having a plan at all. In some cases, having an estate plan that is not suited to your life can be worse than not having one at all. Just like our lives evolve with time, our estate plan must adjust from time to time to address our life circumstances.

Are your young children not so young anymore? Are you transitioning into another phase of your life, like retirement or an “empty nest”? Did your life take an unexpected twist? Or maybe you weren’t aware of some changes in the law of which you would like to take advantage. Here are four things to look for in an existing estate plan to help spot potential areas for revision.

Unnecessary AB Trust

An “AB Trust” is a living trust created by a married couple that “splits” into two or more separate trusts upon the death of one spouse. It was commonly used prior to 2013 for estate tax purposes. It is still commonly used for non-tax purposes, such as re-marriage protection or with blended families. Since estate tax exemption amounts have increased dramatically since 2013, and since we allow spouses to use both of their exemption amounts automatically (“portability”), the AB Trust is no longer commonly used for estate tax purposes. If you created your trust prior to 2013 and your combined estate is worth less than $10 million, then you may want to consider restating your trust to remove the AB Trust provisions.

Outdated distribution path or specific gifts–adult children

Gifts for small children may look a lot different than provisions for adult children. Perhaps parents of young children placed basic care and needs like shelter and education above all else, and made provisions in their trust to reflect that priority. When that young child is a married adult with their own children, those protective provisions may look silly. Similarly, if a young child has grown into an adult who makes questionable decisions–with money, with partners, with their use of their free time–perhaps it’s time to put in more protective provisions for that child. There are many options for providing for your loved ones.

Additionally, perhaps your adult children have become more distinctive as they got older. For example, maybe one of your children moved abroad and the other is staying nearby, perhaps taking some of their time and resources to care for you. Maybe it’s a good idea to discuss whether to leave your home to one child and not equally to both, as to provide for the child who is caring for you, and to not create property tax issues.

Outdated list of decisionmakers

This is by far the most common reason people revise their estate plan. An estate plan is, after all, more about people than things. Being sure the decisionmakers are a list of good, reliable choices is paramount to a comprehensive estate plan. Click here for a prior post discussing how to choose decisionmakers.

Upcoming transition–divorce, aging partner, health issues

Life is nothing but a series of transitions. Your estate plan should be revisited regularly to be sure it addresses the current transition and contemplates any upcoming changes, as well. Are you going through a divorce? Are you about to retire? Perhaps you or your spouse are facing health issues. These are all reasons to revisit your estate plan and plan for the worst while hoping for the best. After all, you didn’t create an estate plan simply to address one set of circumstances.

Use this opportunity to be proactive in shaping your estate plan. If you wait too long, your agency will vanish, and in its place may only be left regret. Speak to an estate planning attorney to explore your options.

Revising Your Estate Plan

Many times when people create an estate plan, it is one thing on the proverbial “to do” list that might get put off longer than we want. But it feels great when we finally get it  checked off as DONE! And while that should definitely be the case, you should also review -- and revise -- your estate plan periodically. 

We’re in an extraordinary time with COVID19 dictating how we are living our lives in a way that we did not expect. In a world not too long ago, we imagined relying on people making financial or medical decisions for us who did not live near us. We have adequate virtual and digital resources to do things online; and if not, travel was available and relatively easy. This is a different world. 

There are several circumstances that arise that may require revision of your plan: 

The People

• Are the people who you designated to manage your money still the right fit for you? Are they healthy enough to take on that burden? (Remember: financial management comes up during incapacitation as well as at the time of death.) 

• Are you still happy with the list of people who you selected to make healthcare decisions on your behalf? Are they nearby enough to talk to your doctor on short notice? 

• If you have children, are the guardians that you nominated still appropriate? 

• Are the beneficiaries “right”? If you didn’t create an estate plan or a trust with us, does your plan account for your children who have been born/adopted since the plan was created? Or, perhaps your children are married with their own children now. Do you have any issues with the partner that your child chose for them self? Do you want to provide for your grandchildren directly?

The Structure

There are several ways to design an estate plan and big decisions that are made as part of the planning process.

• Did you select a survivor’s trust, but now believe an AB trust might be more appropriate?

• Did you want everything to go to your children outright but now want it to stay in trust for them?

• Did you decide that your children are (more or less) responsible and should be able to receive any potential inheritance sooner or later? 

Your Assets

Right now, the estate tax exemption amount is $11.58 million per person, or $23.16 million per married couple. In 2026, that law is set to sunset if Congress doesn’t act, and the exemption amount will drop to somewhere between $10-12 million. If your assets are starting to approach those exemption amounts, you may want to consider different estate planning tactics. 

Changes in the Law

The laws change and how it can impact your estate plan can change too. For example, have you heard of the Secure Act? It went into effect on January 1, 2020. You can read more about it here. 

Take Action

Just as critical, perhaps you are the potential beneficiary in this scenario. Did your parents create an estate plan a long time ago when you were a child, but it can now be revised to reflect better your current living situation?  There is no better time than now to have this conversation with your parents.

If you already have an estate plan, we recommend that you review it every 2-3 years to make sure that it’s still what you want—and to account for any of the above changes. If you’d like us to conduct a review of your estate plan, whether you created it with us or with someone else, please contact us for a complimentary review.