Many of you already have estate documents, probably executed
many years ago. You need an estate attorney to look over your documents every
10 years or so. Here are a dozen points to review.
1. Do you have a will and powers of
attorney for health care and property? These are part of every complete estate
plan. With healthcare power, you choose an agent to act on your behalf if you
become unable to make your own decisions. With durable power for property, you
select an agent to act if you are incapacitated and can’t sign a tax return,
make investment decisions, make gifts, or handle other financial matters.
Make
sure your healthcare power addresses the Health Insurance Portability and
Accountability Act. This governs what medical information doctors can release
to someone other than the patient.
2. Do you need to change any beneficiaries,
executors, trustees, guardians, or others named in your documents? Are all still
living? Can someone you recently found fill a role better?
3. Any updates needed to addendums to your
will that specify who gets what of your personal property? Often I read wills
that mention addendums for personal property and the addendums don’t even
exist.
4. Did you move to a different state since
the execution of your estate documents? If so, seek out a local estate attorney
to check any legal differences for planning between your old and new states.
5. Do you still need your trust documents
or can you decant, which allows you to change some provisions? Consider this
technique of emptying the contents of an irrevocable trust into another newly
created trust if you are unhappy with your irrevocable trust. Not all states
allow decanting.
You
may also want to discuss possibly moving assets out of a living trust (where a
trustee holds them, a technique sometimes used to avoid probate) and holding
them in the name of an individual.
This
discussion will weigh the income tax benefits of a step-up in cost basis, the
original cost of an asset, versus other reasons to keep the trust. (“Step up”
means that the cost basis of an asset resets to the fair market value of the
security as the date of the holder’s death – potentially a much higher value
than when they bought the security.) The higher the cost basis, the fewer
capital gains tax your heirs pay when they sell the asset.
You
may also want to see whether you need an irrevocable life insurance trust, a
device once used to move assets, typically life insurance, out of a taxable
estate. Now that thresholds are higher – individuals can leave $11.58 million
and married couples $23.16 million tax-free – you may not need to move assets.
Also, check when your life insurance expires. Consider how long to keep it if you
think you might outlive the policy.
6. Have your children passed the ages
specified in a children’s trust (in which you designate money for such specific
purposes as education, home down payments, or weddings once the kids reach
stipulated ages)? If your estate documents call for a trust to give children
access to money at certain ages after you die, you may be able to delete that
language if the kids are older than the specified ages.
7. What happens if one of your kids gets
divorced? A trust can help you protect assets for your child or grandchild.
8. Do you have heirs with special needs?
Don’t assume typical estate documents help such an heir. Seek out a financial professional and attorney who specialize in this planning.
9. Check beneficiary designations on
brokerage accounts, insurance policies, and retirement accounts. Anybody you don’t
want there?
10. If you filled out a brokerage account
application (or any beneficiary designation), understand the firm’s policy when
one beneficiary dies before the others. If you want the share of the assets to
pass by bloodline – to the deceased’s children, for example – you may need to
put in language specifying per stirpes (distribution of property when a
beneficiary with children dies before the maker of the will).
Otherwise,
the remaining listed beneficiaries may simply divide the assets.
11. Often a parent names a child on a bank
account so the child can access or use the money if the parent can’t act.
Understand that if you name your child as a joint owner on an account, the
money passes to your child no matter what your will dictates.
The
child splitting the money with someone else constitutes a gift, though one is probably not subject to gift tax now that gifts of less than $5.34 million aren’t
taxed. Still, think carefully so you keep the family peace.
12. Do
your heirs know where to find all your important information? Let someone know
the password to the app where you keep all your passwords – you must remember
digital assets now, too.
