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Estate Planning Considerations

Estate Planning Considerations

Have you checked the date on your estate planning documents lately? We recommend checking in with your estate planning attorney when you have a major life changing event like marriage, divorce, children, receive a sizeable inheritance, when you hear rumblings major changes to the law take place regarding estate and gift tax, such as the anticipated sunset at the end of 2025, or every 5 years. Checking in doesn’t mean you need to update anything, but it’s a good practice.

What should you think about when it comes to creating or updating your plan? Here are several things to consider, though keep in mind that this list is not exhaustive.

  • Do you have powers of attorney for healthcare and property? These are part of every complete estate plan. With a health care directive you choose an agent to act on your behalf if you become unable to make your own decisions. You can also include important end of life wishes. With a durable power of attorney for financial matters, you select an agent to act if you are incapacitated and can’t sign a tax return, make investment decisions, make gifts, or handle other financial matters. If your documents do not address “digital assets” and the Health Insurance Portability and Accountability Act (HIPAA), it’s a good sign that they are out of date!

  • Review the people you chose to serve as agents, trustees, guardians, and personal representative/executors. Are all still living? Do you have an additional successor named if something happens to the first person you listed? Is the person named still the best for the job? If your children are no longer minors, would you like one of them to serve?

  • Does your Trust reference a separate list of personal property you’d like to give to certain people that you haven’t filled out? Take some time to make sure those special items like family jewelry or art go to the right person.

  • Do your children receive money outright or in trust? If your state permits the use of dynasty trusts, discuss the pros and cons of keeping assets in trust with your attorney, especially if you have a circumstance where it might not be wise to give a child complete access to the assets. Distributing money to your children outright as opposed to in trust might not be ideal if they later divorce or have issues with creditors.

  • Do you have heirs with special needs? Don’t assume typical estate planning documents are appropriate. It’s important to make sure that your child with special needs is not disqualified from public assistance. Your planning must be comprehensive, particularly with regard to any retirement benefits such as IRAs or 401(k)s that may be left to your child with special needs.

  • Is your Irrevocable Trust still applicable to your current situation? At one time you might have been out of luck, but you may be able to decant, which is emptying the contents of an irrevocable trust into another newly created trust. Note that not all states allow decanting, and it might not be appropriate in all circumstances.

  • Check beneficiary designations on brokerage accounts, bank accounts, insurance policies, and retirement accounts. Is there anyone you don’t want listed? Be sure to check with your attorney about how to appropriately list beneficiaries on retirement accounts and annuities when you have a Trust to avoid unintended tax consequences.

  • Banks and investment firms typically have their own rules regarding beneficiaries. Be sure to check the account paperwork to see what happens if a beneficiary designation fails. If you want the deceased child’s share to pass to your grandchildren, you may need to put in language specifying “per stirpes” after that beneficiary’s name, otherwise, the remaining listed beneficiaries may simply divide the assets.

  • Sometimes a parent names a child on a bank account so the child can access the money if the parent can’t act. Understand that if you name your child as a joint owner on an account, the money passes to your child no matter what your trust or will dictates. You also expose the money in that account to your child’s creditors. Using a Power of Attorney is a better option.

  • Did you move to a different state since the execution of your estate planning documents? If so, seek out a local estate planning attorney to check any legal differences for planning between your old and new states.

  • Does your family know where to find all your important information? You should have the location of all your assets and passwords in a safe place. That list should also include the contact information for your estate planning attorney, financial advisor, and tax professional.

Keep in mind that circumstances are different for everyone. It’s important to work with an estate planning attorney who can help you design or update a plan based on your unique circumstances and family dynamics. Let us know if we can help!

To read about estate planning considerations from age 18 through the recent college graduate, check out this blog post by Lisa D. McLaughlin.

This material is for informational purposes only and is not legal advice. Receipt and use of this information, by itself, does not create an attorney client relationship.  You should consult with your attorney, tax professional, and financial advisor when creating and implementing your estate plan. The choice of a lawyer is an important decision and should not be based solely on advertisements. 

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