Some years ago we merged with another law firm and inherited estate planning files that had been prepared with a typewriter using vellum carbon copy paper. There are probably a few of you that may ask “What’s vellum carbon copy paper?” Vellum is a very thin (nearly see-through) paper. Before the advent of the copy machine, blue carbon paper was inserted between the pages so that documents could be drafted in duplicates on a typewriter. The attorneys then retained the duplicate that had blue type. Needless to say, if your estate plan was drafted with a typewriter it is likely that your estate plan definitely needs updating. So, this blog is really for those whose estate plans were drafted after the advent of the computer.
It’s important to note that estate plans are only effective when they accurately reflect your circumstances, as well as current state and federal tax law. Neglected estate plans not only jeopardize your estate planning wishes but may also negatively impact your loved ones, not to mention yourself. The unintended consequences of an outdated estate plan can result in issues such as, unintended income and/or estate tax consequences; disqualify a special needs beneficiary from receiving benefits; increased fees and costs associated with settling an estate; leaving less for your spouse and heirs; forcing loved ones into court; disinheriting desired beneficiaries or including unintended beneficiaries.
Below are a few situations that may warrant a rehashing of your estate plan:
1. An occurrence of a triggering life event:
A triggering life event can range from a change in marital status, birth or adoption of a new child, to the death of a close family member. Any of these situations warrant a revisiting of your estate plan to address changes in beneficiary designations, successor trustees, health care and fiduciary agents. If a trust must be changed, updates can be made by way of an amendment or a complete restatement. However, if there are numerous revisions then a trust restatement may be the better option, to prevent future controversies requiring judicial intervention.
If you have recently become a parent or grandparent, you may wish to amend your trust to add specific bequests, add an education trust, set up and fund a gifting trust, UTMA/UGMA account, or 529 plan for your new child or grandchild.
2. Changes to a job and/or living circumstances:
If you have moved to a new state, you may need to update your trust and other estate planning documents to comply with the laws of your new state. You may also need to retitle your new residence in the name of your trust.
If you have purchased a second-home you may need to amend your trust to address what happens to the second home after death.
If you are a business owner, any changes to ownership would warrant updating your estate plan. For example, if you sold your business, you may need to update your trust or add advanced planning to address additional liquidity. If you still own your business, you may need to create a business succession plan.
3. If it’s been a while:
Since state and federal tax laws have changed significantly over the past year, an outdated estate plan may cause income tax or estate tax issues because it doesn’t take advantage of modern, flexible planning options. With the recent increase in the estate and gift tax exemption, it may be advisable for you to:
· Make additional gifts to individuals and trusts.
· Decant non-GST exempt trusts to make them GST exempt.
· Sell appreciable assets to trusts.
· Establish and fund spousal lifetime access trusts.
Significant family changes may have also occurred if a long period of time has lapsed since the creation of an estate plan. For example, an old trust may now inadvertently disinherit desired beneficiaries or include unintended beneficiaries. Additionally, your children who are now grown adults, may be better options for successors, trustees, and other agents in place of your parents, siblings, or friends.
Moravec, Varga & Mooney is a highly skilled estate planning law firm that can assist you in updated your estate plan. If you would like to discuss how we can help you or a loved one, please give us a call at 626-460-1763 or send us an email.