Unless you are in the minority of people who actually pay the federal estate tax, for most people the new tax law may not have a major impact on your family. However, not all of the reasons to review your estate plan have to do with taxes. A recent article in Forbes, “7 Reasons To Revisit Your Estate Plan, Trump Tax Law Aside,” notes the reasons why a review is a smart idea.
The disposition of your assets. Even with a revocable trust in place, a will often serves as the primary means for communicating your wishes. The provisions of a will can state how assets will be transferred, which can include an outright transfer to beneficiaries; to an existing trust (inter vivos trust) or into a new trust that will be created under the provisions of the will (testamentary trust). A testamentary trust in a will can specify the ages of beneficiaries or other terms that determine when beneficiaries will receive assets. Wills also contain specific bequests of financial and nonfinancial assets, like family heirlooms. In addition, charities are often named as recipients of bequests.
Administration and financial management. When a person passes away, an estate is created. The person or institution managing the affairs of the estate is the executor or personal representative, who is tasked with the taking care of the decedent’s assets and liabilities, working with the probate courts, and disposing of the assets in accordance with the will.
Guardianship for children. If an individual has minor or disabled children, the will must designate your choice of a guardian and a successor guardian.
Trusts. Trusts give the creator some level of control over assets and their use through distributions. This can be especially important when leaving assets to those with financial issues, a person with a disability or an addiction, or a financially unsophisticated spouse. Trusts can also shield assets from divorce and the claims of creditors and predators. There are many types of trusts. An experienced estate planning attorney will be able to help you to select the right kind of trust and make sure they are set up correctly.
Other Estate Planning Documents. In addition to the will, an individual should have a health care proxy, health care directives (living will) and a general durable power of attorney over financial matters. One additional document is a letter of intentions.
Taxes. With “portability,” a vehicle that lets any unused credit from the first spouse to die pass to the surviving spouse to use, your current estate plan should be revisited. Consider state estate tax provisions that do not follow the federal tax, which could result in no federal estate taxes, but still a significant state tax.
Gifting. The ability to make lifetime gifts has also doubled. Gifting has many tax savings opportunities. However, it can also create complications from the impact of the gifts on the recipient. Work with an attorney for any sizable gifts.
Bear in mind that you may not need a complete overhaul of your estate plan. However, a review will provide you with a chance to make sure the estate plan still aligns with your life choices and to see if any changes, since the last time you did your will, are available to reduce your tax liabilities.
Reference: Forbes (March 15, 2018) “7 Reasons To Revisit Your Estate Plan, Trump Tax Law Aside”