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Updating an estate plan: when is it time?

On Behalf of | Jul 15, 2018 | Trusts |

Life doesn’t stand still, either abstractly or concerning estate matters.

The rule of thumb has long been that changes in your family structure trigger the need to review your estate plan to ensure that property will still be distributed according to your wishes. Such changes include death, divorce, remarriage or the birth of a child.

With recent changes in federal tax law, however, does it also make sense to review your plan even without major life events such these?

Depending on your circumstances, the answer may very well be yes.

As we discussed in a recent post on estate taxes, due to recent federal legislation fewer estates will have to pay federal estate taxes. For the estate of those who die between 2018 and 2025, the gift tax exemption will double from $5.49 million to $11.2 million – which for couples, comes to more than $22 million.

As a result, during those years, most people won’t have to worry about estate taxes. But it may still be an open question whether a trust that you may have set up to avoid those taxes is still needed. This applies to trusts such as irrevocable trusts or trusts with generation-skipping features.

For example, suppose the main reason your set up a trust was because of the old exemption amount for the estate tax. If that is the case, perhaps changes are in order in your plan.

Moreover, you don’t have to be a high-asset family to benefit from reviewing your plan for possible updates such as changes in beneficiaries. If you changed jobs, for instance, you may need to make sure your intended beneficiaries are listed on the 401(k) from your old job.

In short, significant life events and major tax changes are prompts to review your estate plan. To accomplish your goals, such plans must never be static, but rather always able to respond to time and change.

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