Now is the Time to Review Your Estate Planning Documents and Asset Holdings

When was the last time you reviewed your Will and other estate planning documents? If you are like many others, you are waiting for Congress to make “permanent” estate law changes. Here’s why you should review the documents now. Many Wills are as old as the last major estate tax law change, and therefore may be older than 25 years. What’s changed in your life over those years? Let’s begin with the structure of the Will. If your assets were minimal when you completed your last document, you may have left all of your assets directly to your spouse. If you have in excess of $2,000,000 in combined assets, you could be subjecting yourself to unnecessary estate tax. You may want to consider a Will that, although a bit more complicated, will eliminate the estate tax. The tax is set by law at 45 percent of the taxable estate, which, if no gifts have ever been made, is calculated this year on assets owned in excess of $2,000,000. An unmarried individual with a taxable estate of $3,000,000 may pay $450,000 in estate tax. As we discuss Will structure, you need to look at how your assets will be distributed. Has you family situation changed so that you would prefer to hold assets for a beneficiary’s lifetime? Consider establishing a trust to provide income to a child, for example, without providing the principal to be distributed. It’s one of many choices to consider when planning for special situations. Or, you may establish trusts which allow for assets to be used by your children during their life, and then distributed to your grandchildren without additional estate tax. In addition to the structure, you need to review the persons you have named to handle your estate matters. Your personal representative will gather your assets, administer your estate including the filing of necessary tax returns and accountings and distribute assets according to your Will. Review your Will to be sure the persons named as personal representative are still an appropriate choice. Parents or other family or friends age and may not want the responsibility they agreed to take years ago. On the other hand, children have grown and may become good choices. You have to make the decision. Use the same logic as you review your named Trustees and Guardians. In addition to Wills, you need to review your Power of Attorney. Check the provisions and the powers you have given to your designee. In practice, we find that Powers of Attorney that are older than ten years old are not accepted by certain financial institutions. If you have a Power of Attorney that’s approaching the ten year date, have your document updated. Do you have a Durable Health Care Directive? It’s a document that provides instructions to your caregivers and doctors if you are unable to make decisions about your health care. Take time while you are healthy to review options. Some attorneys have the caregiver sign the document when it’s prepared. It gives them the opportunity to read it and ask questions now, before they guess your desires should hard decisions become necessary. Now is a good time to review trusts that you have set up in the past. Many trusts were established over the past 25 years. Review your documents to determine if you need to make any changes or restatements, and review the assets held in the trust. Adjust the nature of the assets if they are not appropriate. If you have life insurance in a trust, review the policy with your agent and trustee. Since we are on the subject of life insurance, review the beneficiary listed on your policies. Let them become an integral part of the whole estate plan. Annuities and beneficiary forms for your IRA or retirement plans need to be reviewed, too. Many planning opportunities, outside the scope of this article, exist with these assets. Confirm the titling of all assets owned to be sure they go where you want them to. Did you know that any asset held as joint ownership with right of survivorship or designated by a beneficiary form passes outside of your Will? Take time to look at each holding and make changes as necessary. When was the last time you looked at business documents that affect your estate planning considerations? Buy-Sell agreements, Employment Contracts and similar documents need to be reviewed. Just as I have noted with the other documents, situations change with your business during the years that need to be addressed. So, don’t wait. Gather a list of your assets, review your documents and make a concerted effort to be sure that you have an estate plan in place that takes care of your family. Your advisors can provide additional information regarding strategies to provide an orderly transfer of assets and estate tax considerations for Wills. July 2007