Now’s the Time to Review Your Estate Plan
When you first dipped your toes into estate planning, you were probably told to start with a legally valid will. Check. Next, you may have been advised to create an estate plan that incorporates your will and other legal documents, such as powers of attorney and trusts. Check. If you’re working with the best Accounting Services in Brookfield, you can also gain valuable guidance on the financial and tax implications of your estate plan to help ensure it aligns with your long-term goals. Now you think you can rest easy.
Not so fast. That estate plan you created years ago — and perhaps stuck in a drawer or a file cabinet — should be dusted off and carefully reviewed. You may find it to be significantly out of date or in need of only minor tweaking. In any event, it’s likely that some changes are required.
Any Changes Due to Life Events?
Certain life events should trigger a review of your estate plan. Examples include marriage, divorce or remarriage; birth or adoption of a child, grandchild or great-grandchild; death of a spouse or another family member; or an illness or disability affecting you, your spouse or another family member.
Other events that should trigger an estate plan review are the sale of assets or other changes to your financial circumstances. Your finances can change drastically if you sell a business interest, sell your home or incur an extraordinary debt. Such changes may affect the disposition of assets in your will or living (revocable) trust or upend other plans.
Also, tax laws are regularly evolving. Currently, your estate can benefit from a record-high federal gift and estate tax exemption that was made “permanent” by 2025 legislation, meaning that the higher exemption (annually indexed for inflation) has no expiration date. If you’re working with the best Accounting Services in Brookfield, you can stay informed about changing tax laws and ensure your estate planning strategies remain aligned with current regulations. Your estate plan should account for the currently high exemption but may require updates if the exemption is reduced in the future. Other federal and state tax law provisions can also affect your estate plan.
Who’s Your Executor?
Review your choice of executor of your will. This person is entrusted with significant duties, including collecting, protecting and taking inventory of the estate’s assets; filing the estate’s tax returns and paying any taxes due; handling creditor claims and the estate’s claims against others; making investment decisions; distributing property to beneficiaries; and liquidating assets, if necessary. If you have a living trust, the trustee will handle similar duties in relation to the trust.
It’s not an easy job, so be sure you’ve chosen the right person. Depending on your situation, you may delegate the duties to a family member, such as a spouse or adult child, or to an estate planning professional. At the very least, it’s recommended that you rely on a pro to be part of your estate planning team. Remember to name a contingent executor (or trustee) in case your top choice can’t fulfill the responsibilities.
Along the same lines, examine your choices for powers of attorney should you become incapacitated. It’s common to name one person to be responsible for financial affairs and another for health care decisions. As part of your review, confirm that you have the best people lined up for the jobs.
Who’s Getting What?
Your will or trust governs the disposition of most of your possessions, such as securities, real estate, jewelry, and collectibles. Make sure that the division of assets among the named beneficiaries still meets your intentions. You may want to revise designations due to one or more of the life events previously discussed. Working with the best Accounting Services in Brookfield can also help you evaluate the tax implications of these decisions and ensure your estate plan supports your overall financial objectives.
Other assets, such as retirement accounts and life insurance policies, pass to beneficiaries outside your will or trust based on beneficiary designations. For instance, if one of your two children is designated as the sole beneficiary of your 401(k) plan, that child will receive the entire amount, even if the residuary clause in your will provides for a 50-50 split between your children. Regularly reviewing both your estate planning documents and beneficiary designations helps ensure they remain consistent and reflect your current wishes.
For this reason, check all of your beneficiary designations to determine if they still meet your objectives. Plus, you don’t want any conflicts to lead to legal challenges down the road.
If you own a home, make sure it’s titled in a way that’s consistent with your estate planning objectives. Check into the applicable state laws. In addition, weigh other considerations for titling a home, including protection from creditors and potential tax benefits.
Get the Ball Rolling
Bear in mind that this is just an overview of what an estate plan review should entail. Of course, every situation is different. What’s most important is that you recognize the need for this approach and review your estate plan regularly.