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As The Year Comes to an End, Now Is the Time to Review Your Estate Plan

There is a common misconception that estate planning is only for certain people: the rich, and the seniors. But this isn’t true.

Estate planning is for people of all stages of a person’s life, as well as all levels of wealth and family configurations. Estate planning is a process to help you plan for the future by identifying your goals and objectives and how they align with your legacy. This means that your estate plan needs to change as your life changes.

And as we get near the end of the year, this is the perfect time to check whether any life events have taken place in the past this year may have affected your estate plan. It’s also a good time to determine that it still meets your main objectives and is up to date.

So, what sort of life occurrences might require revisions to your estate plan? Here are a few:

Your marriage, divorce or remarriage

If you die without a will, your property will go to your “next-of-kin”. When you get married, that will generally mean it all goes to your new spouse. However, if you want some of your estate to go to someone else, such as your parents or siblings, it’s time to consider getting your estate plan in order. This certainly should start with having each of you make a will, and possibly utilizing some of these other estate plan documents.

A divorce generally invalidates any provisions in your will or other estate plan documents pertaining to your ex-spouse, treating he or she as if they had predeceased you. However, it does not necessarily invalidate other document beneficiaries, executors, trustees, power-of-attorney agents or health care representatives. Nor does it necessarily mean that an insurance company is liable for paying an insurance benefit to your ex-spouse if they have never been notified of the divorce.

You will need to review your will, trust, power-of-attorney, insurance policies, healthcare directive, retirement and investment accounts to make sure beneficiaries and named fiduciaries are corrected.

The birth or adoption of a child, grandchild or great-grandchild

Even if you have included your current children in your will, a new child may need to be added as a beneficiary, not just in your will, but in your other estate documents as well. The same holds true for grandchildren and great-grandchildren as well, and they may not automatically inherit a portion of your estate, even if that is what you would like to see happen. Newborn and newly adopted children, grandchildren and great grandchildren may need guardianships or trusts set up for them, at least until they reach adulthood. This means deciding on and naming a guardian and/or trustee for them as well.

The death of a spouse or another family member

This can create major changes to the distribution of your estate assets, especially if the person who dies has children who are also named in your will. It can also affect your named executor, trustee, power-of-attorney agent, health care representative, if they die. Insurance policies may need to be amended, stopped or cashed in if they are a part of your estate plan.

A child’s marriage, divorce or re-marriage

It is not necessarily typical, but not uncommon to have your children’s spouses included as beneficiaries (or named fiduciaries) as well. If one of your children divorces or remarries, this will be an occasion for reviewing your estate plan to decide if potential beneficiaries or named fiduciaries need to be added or dropped, depending on the new situation.

An illness or disability of you, your spouse or another family member

You or this person may be a beneficiary and you may want to consider if a trust should be set up or changed for you or this person. It may be that a special needs or Medicaid trust or account should be established. This can also happen to you, or a person who is a named executor, trustee, power-of-attorney agent, health care representative and you may need to re-evaluate whether your or that person’s ability to perform the duties that are needed.

A child, grandchild or great-grandchild reaching the age of majority

This person may no longer need the protection of a trust or guardianship and eliminating or amending that trust or guardianship that was set up. This new adult may also be a more logical choice for naming as a fiduciary, especially if current one is elderly. This can require updating wills, trusts, powers-of-attorney and health care representatives. You may also want to give some money to this new adult and want to take advantage of the gift tax exception.

Sizable changes in the value of assets owned

This may have come through a large inheritance of money, a house or other assets or an unusual increase in the value of what you already have, but in any case, if it has pushed your assets’ value to over the estate tax threshold, it is time to review what tax issues will arise or consider a tax-free yearly gifting plan to lower overall estate value. You also may want to consider your current named fiduciary in light of your more complex estate. Depending on which assets gained in value, this may have given a beneficiary an unintended benefit increase. It may be time to rethink the beneficiary distributions in your will to balance out the overall estate plan.

Other financial and life occurrences can include:

The sale or purchase of your principal residence or a business, which can change your tax Issues, and potential beneficiary distribution.

Acquiring property in another state or moving from one state to another state can involve additional probate issues and the laws of the other state. If your current named fiduciary moves to another state, it may also mean re-evaluating that person’s ability to perform the duties due to this distance issue.

A retirement or upcoming retirement of your you or spouse can reduce impending income potential, which may affect your overall estate plan strategy and re-configure Social Security Benefits into the estate plan.

We hope these year-end estate planning tips weren’t just helpful, but that they also help you to remember that estate planning is for everyone. We are happy to respond to any inquiries you may have to help you with your estate planning needs to better plan for the future. We also encourage you to work closely with your tax advisors to ensure that the planning is a coordinated effort.

For more questions, information or to arrange an appointment, contact us at (503) 227-0200.