Every vehicle in the world operates best with regular maintenance. A regular tune-up finds what’s still working well, what parts need to be replaced, and what changes are necessary to keep it running the way it’s supposed to. The same thing applies to your estate plan. Without a regular tune-up it may not run like the well-oiled machine you created because estate planning is not a one-and-done proposition.
Ask any estate attorney and they’ll tell you that most people who create estate plans have the mistaken idea that once the documents are signed, it’s over. Estate planning can be checked off the to-do list and nothing else has to be done until the dearly departed has departed. But even the most perfectly crafted estate plan can be derailed by time and change.
It’s no surprise that the government changes its mind. For example, the current estate tax exemption for 2021 is $11,700,000. But as it stands now, that’s not permanent. As they say on TV, it’s a limited time offer! Unless Congress acts by 2025, the exemption will fall back to its 2017 level of $5,600,000.
When the SECURE Act was passed in 2019, it eliminated the lifetime stretch for non-spouse beneficiaries. That rule change diminished the effectiveness of a lot of estate plans.
Even state governments can derail things. In 2021, two states, Connecticut and Vermont, are changing their estate tax rules which will require people to review their plans and see just how the changes affect them.
It’s inevitable, when laws change, some estate planning techniques and provisions become outdated.
Not only do tax laws change, but so does life. Marriage, divorce, children becoming adults and serious illnesses are reasons an estate plan may not meet your goals anymore. Births or deaths of loved ones may be a reason to change your beneficiaries. Relationship changes may mean the person you named as executor, personal representative, alternate trustee or power of attorney may no longer be the best option. Other reasons might include paying off debt, taking a new job, buying a house or making new investments.
An Empty Trust
If you have a trust, the only way to ensure that your accounts and property are kept out of probate is to have all your accounts and property appropriately funded into the trust. Funding involves changing the ownership from you as an individual to you as the trustee of the trust. But for some reason, a high percentage of people who create trusts forget to fund the trust, or they just don’t get around to it. An empty trust is like having no trust at all.
Life is constantly changing and the smallest change can have a major impact on your estate plan. Pick a date to regularly review your plan—your birthday, the beginning of each year, tax season, something—to make sure your plan still accurately reflects your values, your needs, your desires and your legacy.