The most common question clients ask estate planners is “how often should I update my estate plan?” The answer depends not so much on the passage of time–e.g., every X years–as on changes in family circumstances and financial condition. That is, clients should re-evaluate their estate plans when significant family and financial changes occur, whether positive or negative. In doing so, they should consider the following:
- Is your estate plan primarily tax-driven? Does it still need to be? The death tax laws have become increasingly, for lack of a better word, generous. Tennessee abolished the state gift tax in 2012 and the inheritance tax in 2016. The federal estate, gift, and generation-skipping transfer taxes still exist, but high exemptions mean less than 1% of estates are affected. Plans that were prepared when the state and federal rules were less generous may impose unnecessary complications on your family.
- Does your estate plan properly address non-tax issues? These include disability, out of state real estate, asset management difficulties, liability exposure, remarriage, divorce, family assets, privacy, and disinheritance. Failure to address these issues correctly in your estate plan could result in assets passing in ways you do not intend.
- Does your estate plan take family dynamics into account? Family discord has been known to undo otherwise sound estate planning. Sources of conflict include poorly chosen executors and trustees (particularly when multiple people are serving together), multiple beneficiaries of common funds (e.g., pot trusts), and estate planning arrangements that essentially force family members into business with each other.
- Could your plan be simplified?
- Do you even have a plan? If your documents were not executed correctly, it is the same as if you have no plan at all. A similar issue exists if you have documents, but can no longer locate them. In either case, the default rules that apply under Tennessee law may result in assets passing in a manner contrary to your wishes. For example, the probate assets of a person who dies without a will (i.e., intestate) pass to spouse and children, rather than just to the spouse.
Posted by Joel D. Roettger, JD, LLM, EPLS