Clients, friends and colleagues often ask me “how often should I update my estate plan?” Estate planning attorneys commonly recommend that you review your estate plan documents – i.e., your will, revocable “living” trusts, power of attorney for financial matters, and advance health care directives – at least every five years. You should, however, consider updating your plan whenever there are major changes in your life or the law.
Births, deaths, marriage, and divorce are perhaps the most common reasons people update their estate plan documents. The death of a beneficiary may create gaps in the distribution of your assets. The death of someone you have named as executor or trustee may leave your will or trust with no one to manage it when you die. Filling these gaps after you die may require expensive and time-consuming court involvement.
You should update your plan after the birth of children or grandchildren. If you get married or divorced, you must execute new estate plan documents to add or delete your spouse, as the case may be. Although the law tries to account for birth, death, marriage, and divorce even if you do not update your estate plan, court involvement may be required to clear these issues up, and the remedy may not follow your wishes.
If you have experienced a change in wealth, either up or down, your plan may need to be updated as well. Inheritances, vesting of stock options, or a signing bonus on joining a new employer may necessitate creating a new gifting plan. And be mindful of gifts of specific items, such as jewelry or a house. If you no longer possess those items, you should update your plan to change or eliminate the gift.
The new tax law that took effect in 2018 doubled the exemption for Federal estate tax. For 2019, every person has an estate tax exemption of $11.4 million ($22.8 million for a married couple). Very few estates are now subject to estate tax. Most older estate plans were drafted to minimize ot eliminate estate tax exposure, which is no longer necessary for all but a handful of individuals. Estate plans now seek to balance estate tax exposure with minimizing potential capital gains tax on the sale of assets that have increased in value over your lifetime. You should review your plan to determine if it protects you from an estate tax you are likely never going to pay, while ignoring a potential capital gains tax on highly- appreciated assets.
Your estate plan should carry out your wishes. Your wishes may change over time as your life, and the law, evolves. Now is the time to review your estate plan documents.
Travis Neal looks at the Spousal Lifetime Access Trust and how business owners can minimize the estate tax implications when their business is worth more than the gift and estate tax exclusion.
Many trustees employ counsel to provide advice on dealing with and responding to inquiries from beneficiaries. Trustees may believe that their communications with and advice from counsel are confidential and cannot be disclosed to the beneficiaries without their consent. The recent court decision in Fiduciary Trust International of California v. Klein (2017) 9 Cal. App. 5th 1184 is a cautionary tale that warns trustees against assuming that all communications with an attorney are confidential.
The statutory scheme for enforcing money judgments against trusts, the limitations on that scheme when facing spendthrift clauses, and ways around those limitations.