Doing or updating your estate plan should be one of the things on your list no matter what time of year it is. Why though? This article will describe the many reasons for adding this as one of your todos for 2013.
Why should you do an estate plan?
1) Probate Avoidance: With no estate plan, your family and loved ones may need to go through the probate process, a process which can be very lengthy and expensive. It has been our experience that those who have to deal with the probate process really wish that they hadn’t had to do that because of the delay, stress and expense of going through pro- bate. A proper estate plan can help ensure that your loved ones won’t have to go through probate.
2) Make Sure Assets Flow to Who You Want: With no estate plan, your assets may not flow down to the people you want your assets going to. For instance, in Massachusetts, assets in only your name with no beneficiary designation may not go entirely to your spouse if you have no estate plan and you have living parents and no children or if you have children from another marriage or relationship. Further, if you want your assets to pass to a non – family member, you definitely need an estate plan to help ensure that assets pass to whom you want.
3) Nominate Who Would be Best for Your Children’s Guardian: It is not unusual to hear from a client that it took them a long time to come and see us because they just couldn’t decide who they wanted as guardian for their children if they died. Although making this decision is a hard one, if you are having trouble deciding, just imagine what it would be like for a court to decide. Sometimes a decision (especially one that you can change) is better than no decision. An estate planning attorney can help you talk through your decision – making process.
4) Mitigate Family Disharmony: Making no decisions regarding what you want to happen to your assets can lead to family disharmony and friction. By taking the time to deal with potential issues now, you may be able to mitigate or eliminate family friction down the road. For instance, business owners who do not have all children involved in the business should sit down and plan out how assets will be divided so that it can be as equitable as possible. If a business owner doesn’t plan appropriately, children who have worked alongside mom or dad in making the business a success may suddenly find themselves sharing the business with siblings who shouldn’t or didn’t want to be involved in the business.
5) Deal with Incapacity Issues: Getting in place a power of attorney and health care proxy along with other estate planning documents will help your loved ones care for you in case you ever become incapacitated. If you don’t have an estate plan in place, your loved ones may need to go to court and obtain a guardianship or conservatorship if you are incapacitated – this, like probate, can be very lengthy and ex- pensive, and could have been easily avoided by getting a power of attorney and/or health care proxy in place.
6) Minimize the Impact of Estate Taxes: With the new enactment of the Ameri- can Taxpayer Relief Act, many people think that they have no exposure to estate taxes since the tax threshold is currently $5.25 Million. This however relates to fed- eral estate taxes. Massachusetts has its own estate tax that triggers when a person’s assets exceed $1 Million. That’s a big difference and will be very surprising to most, especially when a person realizes that life insurance that they own as well as retire- ment assets are calculated in as part of their total assets along with any real property, personal property and other assets (bank accounts, investment accounts, business interests, etc.). So, a $1 Million life insurance policy can suddenly bring someone’s estate above the Massachusetts estate tax threshold. Planning can be done in order to minimize or negate this impact.
Why should you update your estate plan?
1) Personal Circumstances Have Changed: We always tell clients that any life – changing event in their lives should trigger them doing a review of their estate plan to see if the estate plan needs to be changed. Life – changing events can include, among other things, a marriage, divorce, birth of a child or grandchild, a death in the family, a job or career change, a significant change in assets, or an inheritance. An estate planning attorney can help a person review their estate plan to see if it needs to be changed or updated based on any one of these occurrences.
2) Laws Have Changed: This may surprise some people, but laws change…sometimes frequently. This can defi- nitely happen in the area of estate planning. Some law changes may not affect your estate plan; other changes in the law can dramatically affect your plan. You should check with your estate planning attorney to see if your plan is up to date. For instance, in Massachusetts, married couples who set up trusts more than 10 years ago should definitely have their estate plan updated since Massachusetts established its own estate tax (separate from the federal estate tax) in 2003.
3) Your Documents Might Be Considered Stale: Some financial institutions do not accept a power of attorney that is older than a certain number of years. Although the pow- er of attorney might still be legally valid, some financial institutions have internal policies that state that they won’t accept the power of attorney after a certain period of time. Some health care providers may also be worried relying on an old health care proxy. Those relying on these documents will want to know that it is still the creator’s intent that the docu- ment applies. As such, it is a good practice to update these documents every 5 years or so or upon a change in circumstances.
So, when should you do or update an estate plan?
It might be now. Plan…so that you can have peace of mind…so that you can have one less to do… and so that you can enjoy life.
