When was the last time that you reviewed and updated your estate plan? If you can't remember what your estate plan includes, or if you haven't reviewed and updated your estate plan because you're not sure when it should be done, this article will help you better understand the process. You will learn about which factors or events should trigger you to review and update your estate plan, as well as the basics on how to review and update your estate plan.
First, we will start with some things that you know with absolute certainty change your life: major life events. Any time you experience a major life event, you should, at the very least, review your estate plan. Most major life events also require updating your estate plan as well. The most common major life changes are:
There is a change in your marital status. This may include getting married, a separation, or a divorce. This could affect estate planning documents such as the beneficiary of your revocable living trust, the named agent of your durable power of attorney, and your will.
You become a parent. This may include biological children, stepchildren, adoption, or a combination of these. This could affect estate planning documents such as the beneficiaries of your revocable living trust, the need to establish a revocable living trust, the need to establish a special needs trust, and changes to your will. You may also wish to purchase life insurance. You also need to review and update your estate plan when your children become adults.
You become a grandparent. This may include biological, step, adopted, or a combination. You may wish to review and update all aspects of your estate planning documents, especially if you plan to utilize any generation-skipping methods or want to include your grandchildren in your business plans when they are adults.
You move out of Oklahoma. If you move to another state, it is imperative to have your entire estate plan and all estate planning documents reviewed and updated by estate planning attorneys to ensure everything complies with state law.
You purchased a second home or a vacation home. Reviewing and updating your plan may be able to help you with federal or state tax law matters as well as potentially protect the assets from creditors on behalf of your beneficiaries through certain estate planning tools such as a revocable living trust.
Your business plans change and you decide to buy a business or to sell your existing business. A business is an asset with a value. Buying a business brings value to a part of your estate plan. Selling a business brings liquidity to part of your estate plan. Both require a review and update of your plan.
Your financial circumstances have changed. It could be that you’re making substantially more money that makes you wonder about the federal estate tax. It could be that your income and assets have dropped substantially and you're wondering if your estate planning documents should change.
You've changed your mind about to whom you would like to leave assets to or your charitable wishes have changed. If you change your mind about either of these important aspects, it is time to review and update your plan.
Tax law is one of the most common changes to the law that drives people to review and update their estate plans. For examples, CPAPracticeAdvisor.com states that the key tax law changes for 2020 were:
- Economic Impact Payments.
- Paycheck Protection Program Loans.
- Form 1099-MISC formerly used to report payments to non-employees is replaced by Form 1099-NEC.
- Multiple changes to charitable contributions because of the CARES Act.
- Unearned income of a child under 19 years old or a full-time student under 24 is taxed at the trust and estate tax rate if elected by the child.
- The required minimum distribution age is 72 years under the SECURE Act.
- Retirement plan distributions have changed and may now exclude the 10% early withdrawal penalty.
- Changes to retirement plan loans. Taxpayers now have up to six years to repay loans.
This is not a full list of tax law changes. State law changes and federal law changes may also impact whether you need to, at the very least, review your estate plan.
First, start with pulling out your estate planning documents. Next, consider your major life changes. How do your major life changes impact your current estate planning documents? If your documents include a power of attorney or will, do changes need to be made because of a marriage, divorce, birth, or death? Did you recently buy or sell a business?
Updating your estate plan depends on the estate planning documents. A living revocable trust can be changed while an irrevocable trust cannot. You can amend your will by writing codicils and attaching them to your will after you initial or sign them.
However, it is often less stressful to work with estate planning attorneys to update all or part of your estate plan. This ensures that you update your plan according to changes in state laws, federal laws, and tax laws.
Ball Morse Lowe provides free consultations for estate planning. To schedule your free consultation with our estate planning attorneys, click here.