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Spring Cleaning for your Estate Plan


Paige H. Jones, JDSpring is a time of renewal; we dust off the old and focus on creating change. While you have all this energy and focus, it might be time to clean up your estate plan, possibly even simplify your plan. Here are some reasons why your estate plan might need a spring cleaning.

Taxes - Many clients that we meet prepared their wills 5 – 10 years ago when the estate tax limits were much lower. At the time, it made sense for them to include family trusts in their wills to save estate tax. With the increase in the estate tax exemption, many of these complex wills are no longer needed and they may even create additional capital gains taxes. When you die, your assets receive a new basis adjustment (commonly referred to as a “step-up”). The persons who inherit your assets will have a higher basis, reducing the amount of capital gains when those inherited assets are later sold. For a married couple with an estate plan that includes a family trust upon the first spouse’s death, the entire community estate and the separate estate of the deceased spouse receive a step-up at the time of the first spouse’s death. Upon the death of the surviving spouse, only those assets owned outright by the surviving spouse receive a second step-up. The assets that are funded to the family trust do not receive a second basis adjustment. If the family trust was no longer needed to save estate tax, we could be unintentionally creating additional capital gains for the children. Thus, it might be time to simplify your Will to remove the family trust.

Review Your Fiduciaries – Your Will and Powers of Attorney name multiple fiduciaries to act on your behalf such as Executors to carry out the wishes of your Will, Trustees to manage and disburse trust assets for yourself or your children, Guardians for your children, and Agents under a medical power of attorney or financial power of attorney. These are tough positions to fill, and it’s not uncommon when reviewing plans with our clients for them to be surprised at their selection many years ago. Time has a way of changing circumstances. The person you named as your medical power of attorney may now live half way across the world, or you no longer trust the person named as your Executor. Or maybe your children were young when you drafted your estate plan and now they should be named for these important positions.

Beneficiary Designations - Your Will only disposes of your probate assets. It does not dispose of your non-probate assets. Non-probate assets are those that pass by a beneficiary designation like life insurance, retirement accounts and even brokerage or checking accounts. Do your designations coordinate with your Will? It’s time to verify those designations. Often it is possible to simplify your estate plan without rewriting your Will, just by revising beneficiary designations. If your Will includes a family trust at the first spouse’s death that is no longer needed, you can change your beneficiary designation to name your spouse as the outright beneficiary.

There are many factors that play into a good estate plan, and we don’t recommend that you make changes on your own without meeting with a professional. Taxes are just one reason for trust planning, there are others that may still apply for your circumstances. We offer a consultation to review your current plan and provide advice on how to clean up your plan.

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