We know why estate planning for your assets, family, and legacy falls through the cracks. It’s not the thing a new parent wants to think about while cuddling a newborn or a grandparent wants to think about as they prepare for a family get-together. However, this is an important thing to take care of, advises a recent article from Kiplinger titled “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?
The estate plan needs to be reviewed every four years or every time a trigger event occurs—birth, death, marriage, divorce, relocation. Reviewing an estate plan is relatively straightforward, and neglecting it could lead to undoing strategic tax plans and unnecessary costs.
Moving to a new state? Estate laws are different from state to state, so what works in one state may not be considered valid in another. You’ll also want to update your address and ensure that family and advisors know where they can find your last will in your new home.
Changes in the law. The last five years have seen an inordinate number of changes to laws that impact retirement accounts and taxes. One big example is the SECURE Act, which eliminated the Stretch IRA, requiring heirs to empty inherited IRA accounts in ten years instead of over their lifetimes. A strategy that worked great a few years ago no longer works. However, there are other means of protecting your heirs and retirement accounts.
Do you have a Power of Attorney? A POA gives a person you authorize the ability to manage your financial, business, personal and legal affairs if you become incapacitated. If the POA is old, a bank or investment company may balk at allowing your representative to act on your behalf. If you have one, make sure it’s up to date, and the person you named is still the person you want. If you need to make a change, you must put it in writing and notify the proper parties.
Health Care Power of Attorney needs to be updated as well. Marriage does not automatically authorize your spouse to speak with doctors, obtain medical records or make medical decisions on your behalf. If you have strong opinions about what procedures you do and do not want, the Health Care POA can document your wishes.
Last Will and Testament are Essential. Your last will needs regular review throughout your lifetime. Has the person you named as an executor four years ago remained in your life or moved to another state? A last will also name an executor for your property and a guardian for minor children. It also needs to have trust provisions to pay for your children’s upbringing and protect their inheritance.
Speaking of Trusts. If your estate plan includes trusts, review trustee and successor appointments to ensure they are still appropriate. You should also check on estate and inheritance taxes to ensure that the estate will cover these costs. If you have an irrevocable trust, confirm that the trustee is still ready and able to carry out the duties, including administration, management, and tax returns.
Gifting in the Estate Plan. Laws concerning charitable giving also change, so be sure your gifting strategies are still appropriate for your estate. An estate plan review is also a good time to review the organizations you wish to support.
Reference: Kiplinger (July 28, 2021) “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?