Last week, I told you that you should consider having your estate plan modified if you’ve had a life changing event, because failing to do so could completely derail your plans. Perhaps last week’s message made you fee relieved. After reading last week’s blog , specifically if you aren’t just a talker but a pro-active planner, you probably smiled to yourself, thinking…I’m in the clear. I don’t have to do anything. I haven’t had a life changing event. I’m still married to my high school sweetheart, my children were grown when my estate plan was done, and Praise the Lord, none of them have special needs. So… I’m good! Right? Well…maybe, maybe not.
Even if you haven’t had a life changing event, as a general rule of thumb, you should consider having your estate plan reviewed by a professional every five years or so. Why? Because federal laws change, state laws change, tax laws change. And while changes in the law will not necessarily invalidate your estate plan, they may have some unintended consequences.
Let’s say you had an estate plan drafted in 2003. At the time, your children were grown, you were married, you were close to retirement, and had no intention on relocating to another state. Fast forward to 2019, you are still married to the same person, and living in the same home. Give or take a few gray strands, and maybe one or two grandchildren, everything is pretty much the same.
While your family dynamics and living arrangement have not changed, tax laws have changed quite a bit. Back in 2003, the federal estate tax exemption was around a million dollars, meaning you could leave about a million dollars to your children tax free. It was not uncommon for a Will to have language that said please leave everything that can pass free of estate tax to my children and the rest to my spouse. But now, the federal estate tax exemption has increased to over $11 million. So, if you have a fairly modest estate that’s worth about $2 million, and you thought well, based on my Will, a million will go to my children and the rest will go to my spouse… that’s no longer the case. Unfortunately, despite being a pro-active planner, your outdated Will could unintentionally disinherit your spouse, because today, unlike 2003, a much larger chunk can be passed down to your children tax free. That’s just one example. If you’re thinking well…I have a trust. I’m don’t have to worry about that. Well…you’re wrong.
So, even if you haven’t had a life changing event, if your estate plan was drafted more than five years ago, odds are, you should have it reviewed by professional. In case you didn’t know, by professional, I mean an Accountant, a Licensed Trust & Estates Attorney well versed in this area of law, or a Tax Attorney.