If you have executed a will or trust, you should be commended, as you are already in a more prepared category than most Americans. But you should not let it sit and be forgotten. There Is value in reviewing your estate plan at least every three to five years.
It needs to be accurate, not just on the day that it’s executed, but on the day—hopefully well down the line—that you face death or disability. If it stays in a safe place and collects dust, it may not be reflective of your wishes at the time that it’s carried out.
Generally, people who make an estate plan do not incur significant time or expense making changes to it over time, but it’s worth sitting down to review it with your estate planning attorney every few years, for peace of mind.
Changes in the Law
It’s not all that common that a law change would require someone to overhaul his/her estate plan. Most laws are designed not to do this. For example, when Medicaid look-back periods are increased, they’re rolled out gradually over time going forward, so as not to penalize people who made past gifts/transfers that were permissible in the time frame laid out by the existing law. However, it is important to stay up to date on laws that may affect your estate plan. For example, the federal estate tax exemption is slated to drop precipitously from $11.7 million per person to potentially as low as $3.5 million, which would put many people who did not previously face estate tax consequences into taxable territory. People who never considered estate taxes before may want to do planning that could minimize them.
Moving to a new jurisdiction
The laws that govern trusts and estates can vary significantly from state to state. The majority of states do not have state-level estate taxes, but the ones that do (including New York) have a variety of different rules. There are many estate planning tools, varying by state, to minimize those taxes. Further, on the elder law side, Medicaid, though a federal program, is administered quite differently in each state. The rules to qualify can vary, and the type and level of services are different. Most standard wills and trusts are quite portable, but if you move to another state, it’s often worth having your estate plan reviewed by a local attorney to make sure it is compatible with the laws there, and as effective as it can be.
Changes in your financial situation
Sometimes people come into money after making their estate plan, through inheritances and other means. This could necessitate changes in the way that you think about your estate plan. If you have done Medicaid planning, these new assets could be a significant point of exposure that you want to look to protect. Further, it is possible that new assets raise tax considerations for estate planning that you had not needed to previously consider.
In the case of trusts, funding is key. It’s not enough to have a trust in place. For a trust to work strategically, the trust must be funded with your assets. Attorneys will generally deed your properties to the trust, and assist you with transferring investment accounts and other assets, as deemed advisable. However, often people move money around over time, change banks or investment advisors, buy and sell real estate, and shift financial strategies. In the shuffle, sometimes money that was once in a trust, ends up otherwise titled. It is important to ensure that the trust remains funded so that it is best positioned to carry out your wishes. Reviewing your estate plan regularly can help make sure the trust’s funding remains accurate.
Family Dynamic Shifts
Sometimes people exclude a family member from a will or trust, but the relationship evolves favorably over time. Fortunately, the beneficiaries of most plans, including some irrevocable trusts, can be changed. If you reconcile with someone you have excluded or become estranged with someone who is a beneficiary, your estate plan can be fixed. Sometimes a son or daughter marries someone who causes concern. You can change your estate plan to leave money in trust to the grandchildren, so that it is insulated from creditors, lawsuits, divorces, and remains in the bloodline for the grandchildren, instead of the spouse.
This article appeared in the July 2nd edition of the Senior Gazette.
This is not intended to be legal advice. You should contact an attorney for advice regarding your specific situation.