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Estate Planning

12 Estate Planning Absolute Must-Dos

When was the last time you had your Estate Plan reviewed?  Many of you already have estate documents, probably executed many years ago. We strongly recommend that you have a qualified Estate Planning Attorney look over your documents every 2-3 years or so. Here are a dozen points to review.


1. Do you have a will and powers of attorney for health care and property? These are part of every complete estate plan. With health-care power, you choose an agent to act on your behalf if you become unable to make your own decisions. With durable power for property, 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.


Make sure your healthcare power addresses the Health Insurance Portability and Accountability Act. This governs what medical information doctors can release to someone other than the patient.  Do your young adult children also have their own?  As you young adults go off to college or leave home, who has their permission to consult with their physician in the event of a critical injury or incapacitation?  Do you?  This is an area many parents misunderstand or often neglect.


2. Do you need to change any beneficiaries, executors, trustees, guardians, or others named in your documents? Are all still living? Are they all still willing to serve in this capacity? When was the last time you spoke with them on their role? Can someone you recently found fill a role better?


3. Are there any updates needed to addendums to your will that specify who gets what of your personal property? Too often, we read Wills that mention addendums for personal property, and the addendums are outdated, or worse yet, don’t even exist.


4. Did you move to a different state since the execution of your estate documents? If so, we strongly recommend that you seek out a local Estate Planning Attorney to check any legal differences for planning between your old and new states. We keep a list of local Estate Planning Attorneys whom we have interviewed and known will take care of our clients. We meet with these Attorneys regularly to ensure they are still the professionals we want to work with.


5. Do you still need your trust documents, or can you decant them, which allows you to change some provisions? Consider this technique of emptying the contents of an irrevocable trust into another newly created trust if you are unhappy with your irrevocable trust. Not all states allow decanting.  Please meet with a qualified Estate Planning Attorney to see if this is an option for you. Don’t know one, ask? Ask, we’d be happy to make a referral.


You may also want to discuss possibly moving assets out of a living trust (where a trustee holds them, a technique sometimes used to avoid probate) and holding them in the name of an individual.


This discussion will weigh the income tax benefits of a step-up in cost basis, the original cost of an asset, versus other reasons to keep the trust. (“Step up” means that the cost basis of an asset resets to the fair market value of the security as the date of the holder’s death – potentially a much higher value than when they bought the security.) The higher the cost basis, the fewer capital gains taxes your heirs pay when they sell the asset.


You may also want to see whether you need an irrevocable life insurance trust, a device once used to move assets, typically life insurance, out of a taxable estate. Now that thresholds are higher – individuals can leave $11.7 million and married couples $23.4 million tax-free – you may not need to move assets.


Also, check when your life insurance expires. Consider how long to keep it if you think you might outlive the policy.  If you think you might outlive it, do you need to add more?  Work with a fee-only fiduciary advisor to help you determine the right amount and right type of coverage you might need. An insurance company does not incentivize us to make recommendations.


6. Have your children passed the ages specified in a children’s trust (in which you designate money for such specific purposes as education, home down payments, or weddings once the children reach stipulated ages)? If your estate documents call for a trust to give children access to money at certain ages after you die, you may be able to update that language if the children are older than the specified ages. Please consult with a qualified Estate Planning Attorney to see if this is a wise move or if you are better served with a new plan.


7. What happens if one of your children gets divorced? A trust can help you protect assets for your child or grandchild.

Predators, Creditors, and maybe a few Senators


A well-drafted trust can also help protect assets from Predators, Creditors, and maybe even some Senators.


8. Do you have heirs with special needs? Don’t assume that typical estate documents help such an heir. Seek out a Financial Advisor and Attorney who specializes in this planning.


9. Check beneficiary designations on brokerage accounts, insurance policies, and retirement accounts.  Is there anybody you don’t want there?  Are there people or charities you wish to add?


10. If you filled out a brokerage account application (or any beneficiary designation), understand the firm’s policy when one beneficiary dies before the others. If you want the share of the assets to pass by bloodline – to the deceased’s children, for example – you may need to put in language specifying per stirpes (distribution of property when a beneficiary with children dies before the maker of the will).


Otherwise, the remaining listed beneficiaries may divide the assets.  Please consult with your Estate Planning Attorney before making any changes so you can understand how they can affect your long-term plan.


11. Often, a parent names a child on a bank account to access or use 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 will dictates. The child splitting the money with someone else constitutes a gift, though one probably not subject to gift tax now that less than $11.7 million isn’t taxed. Still, think carefully, so you keep the family peace after you are no longer here.


12. Do your heirs know where to find all your important information? Let someone know the password to the app where you keep all your passwords – you must remember digital assets now, too.  We help our clients organize their documents, create a spreadsheet of all their assets, accounts, insurance, websites, and teach them how to keep this regularly updated on an encrypted thumb drive.


If you’d like a copy of our “2021 What Issues Should I Consider when Reviewing My Estate Planning Documents” checklist, click here to download your copy.   Should you have any questions or want to discuss more, we would be happy to refer you to a qualified Estate Planning Attorney.


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