It is important to update your trust and estate plan regularly to protect your interests and meet the changing requirements of your future while integrating changes in law and best practices to provide for every potential scenario. "We were meaning to make some changes when Bob's health rapidly declined - he was gone before I knew it. Now, half of everything we have is tied up, and I'm unsure about my own future." Many older estate plans and associated revocable and irrevocable trusts provide strict limitations on how your assets will be divided, and what is to become of half of your assets if you are presently married.
This may not allow for changing intentions, the best interests and variety of options a surviving spouse may require, or the provisions of U.S. tax law that are at risk of sunsetting within a year.
"You learn who you can depend upon." Those chilling words were hard to listen to as a client shared a story of children who drifted away versus those who took care of some very practical daily needs for an aging parent.
A basic estate plan may involve a will, advance healthcare directives, and revocable trust. Complex estate and tax planning may be required when considering international investments and business, business succession planning, blended families, and the present and future health of the grantor(s). Each situation is as different and unique as the people these plans are designed to protect and support. Each type of trust has advantages and disadvantages, but the ability to flex and meet the changing needs as years go by is one critical measure of a successful trust.
Update your trust and estate plan regularly, at least every 3 years. It is essential to update documents, plans, and structures to reflect the changes in your life and updates to our laws and tax code. For example, the 2017 Tax Cuts and Jobs Act (TCJA) provided a reduction in tax brackets, an increase in standard deductions, and substantially increased estate tax limits. The TCJA also substantially increased the Alternative Minimum Tax exemption (almost 50%), substantially reducing the tax burden of many business owners and investors.
These provisions are presently scheduled to sunset at the end of 2025. This leaves the incoming U.S. Congress and administration less than 11 months to overhaul the U.S. tax code or extend or amend TCJA provisions.
Presently, U.S. estate tax exemption is $13.61 million for an individual and $27.22 for those who are married. This provision is scheduled to return to its previous level (2017 rates adjusted for inflation), estimated to be only $7 million for an individual and $14 million for a married couple.
Why is it important to update your trust and estate plan regularly? Think of all the substantial changes in our lives just since the pandemic. That was just over four years ago. What significant life changes have occurred since you last reviewed and updated existing plans? Have you divorced or married? Has there been a substantial change in your business holdings, investment property, portfolio, or income? What changes have occurred in the lives of your beneficiaries? Are there any developments in your health or that of your spouse? Have you moved to a different state?
When was the last time you sat down with an estate planning and tax professional to review your trust and estate plan? This simple precaution can make a substantial difference in your ability to navigate the opportunities and challenges you face in the coming years, as well as the quality of life for your spouse, children, beneficiaries, and the causes you care so much about.
It is important to update your trust and estate plan regularly to protect your options now and in the future, provide for the needs of those important to you, and preserve your well-being and peace of mind.
