What to look out for when reviewing your existing estate plan.

Congratulations! You have an existing estate plan in place to protect yourself and your loved ones should anything happen to you. Shockingly, you are in the minority (yes, the majority of Americans do NOT have a will, powers of attorney or health care directives in place) but you can’t control what other people are doing so you are focusing on your own plan. Also, you are taking the initiative to review your existing estate plan to see if it needs to be updated. There are a variety of reasons to update your estate plan but it also makes sense to occasionally review your documents to make sure they accomplish what your current goals and needs are (which may have changed over the years).

Here are a few things to consider when reviewing your estate plan documents:

  • Changes to the law. Federal estate tax laws changed dramatically at the end of last year both increasing the exemption amount for estates (and lifetime gifts and generation skipping gifts), changing the tax rates, and allowing for the portability of unused portions of your exemption to your spouse. If your estate (combined value if you are married) is worth close to or greater than $2 million there are some unique opportunities now available to reduce potential state and federal estate taxes.
  • Bequests. Many people include bequests of specific property or cash amounts in their wills for a variety of reasons. If you have specific bequests in your will you should consider whether they are still justified and whether you still own the specific property. For example, if you have included a gift to your niece of your 1958 Ford Mustang convertible (and cash gifts to your other nieces and nephews) and you have subsequently sold the Mustang, the niece will receive nothing under your will (however the others will receive their gifts). Or perhaps you have written into your will a gift to your son of $100,000 to balance out the fact that you paid for your daughter to go to Medical School. Suppose since your will was initially drafted, you have paid tuition for your son to go to Law School. Your son would still receive the $100,000 under the old will if it is not changed and your daughter would likely feel she was treated unfairly. You should review the gifts included in your existing will to check that no changes are necessary.
  • Funding of your estate. Remember that your will only controls the disposition of your probate assets, which does not include anything with a beneficiary designation such as life insurance, retirement accounts, Joint Tenancies, etc. If you have made gifts to heirs or are establishing trusts in your will, these must be “funded” by assets that are actually included in your estate as probate assets. It may be necessary to check that your probate assets are sufficient to “fund” all of the gifts and transfers to trusts outlined in your will. This might be a particular issue to those that have been retired for a while and hold most of their assets in retirement accounts and have little in the way of “cash” or those with large life-insurance policies.
  • Executors, trustees, attorneys-in-fact and guardians. One of the most important pieces of information found in your estate planning documents is the naming of who you want to be in charge of handling your affairs in the event of sickness, incapacity or death. The person(s) you name as your executor, trustees, attorneys-in-fact and guardian of your minor children have a great deal of responsibility and power. Are the people you trusted to handle such matters in your original will still the ones you would choose today? Perhaps they have moved away, taken on greater responsibilities with work or their families, have died or shown they are no longer trustworthy or able to handle your affairs as well as their own.  It may be time to change the designations in your will, powers of attorney and health care directive.

If you do need to make changes to your estate planning documents either because of the above reasons or simply to update them to correspond to your current and expected situation and goals then you may be able to accomplish that through amendments, or “codicils”, but may require completely new documents. You should use an attorney to review your options and draft appropriate changes to meet your changed circumstances. You should NOT simply make the changes to your documents in pen and then sign or initial next to them. This is not legally sufficient in most cases and will only result in confusion and potentially unintended results.

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