As a general rule, it is good to review your plan after a major life event, a significant change in assets, or a change in law. Here are some things to keep in mind when determining whether your estate plan needs a tune up:
1) Changes in law. Laws are constantly changing at the federal, state, and even local levels. For example, one of the changes affecting medical documents went into effect January 1, 2009. If you did your estate plan prior to that date, it would be a good idea to update your medical documents. Fortunately, recent changes in tax law raised the federal exemption to about $11 million so the majority of people will not be subject to a 40% federal estate tax. However, the federal exemption was only $675,000 in 2000 and any amounts above that were subject to a 55% federal estate tax. A common technique in 2000 when the exemption was lower was to leave everything that could pass free of the estate tax to the decedent’s children with the remainder going to the spouse. If you haven’t looked at your estate plan for a couple decades and have a similar provision, you might inadvertently disinherit your spouse and leave your entire estate to your children. 2) Changes in family. As time passes, the preferred person to administer your affairs may change. For example, someone with minor children may initially designate parents or siblings to serve in financial or medical capacities. However, as their parents age and as their children mature, it may be reasonable to make a change to their documents. I recently updated one of my client’s successor trustees because he was uncertain about how his sister’s new husband would influence her judgment in administering the estate.
3) Changes in assets. The most likely asset to drag you into probate is real property. I recently met with a client who was overwhelmed with the sudden passing of her spouse. When we met to discuss her needs, she delivered a deed that only listed her deceased spouse as the owner. I informed her that we would have to go through a probate judge to pass the title from her deceased spouse to her unless there was a subsequent deed that she was not aware of. I did a records search and discovered that she had delivered an old title to me and, fortunately, she had been included on the deed as a joint tenant with full rights of survivorship when she and her deceased husband had refinanced their home. Recording a simple deed with the county recorder can make the difference between probate and probate avoidance.
If you have questions about the validity of your estate planning documents or whether your trust is properly funded, please give me a call!