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Apr 2014
09
April 09, 2014

Life Changes, So Should Your Estate Plan


A periodic review of your estate plan can be just as valuable as its initial creation.  It is important to update your estate plan as lives and circumstances change, so that your objectives are attained, and wishes fulfilled, to the greatest extent possible.  Here are a few of the more common reasons to revisit, and possibly update, your estate plan:

People Change

The circumstances of the individuals who will benefit from your estate plan and the individuals you have designated to administer your estate may change.  You may have set up your existing estate plan while your children were young, in which case: (a) the basic needs of your children, such as health and education, and the retention of assets in trust to meet those needs, were likely among your primary concerns; and (b) you probably did not designate them to administer your estate.  Now that they are adults, you may want to change your estate plan to provide for the outright distribution of assets (or to address more relevant concerns they may face, such as creditor issues and/or unstable marriages), or to provide gifts for grandchildren. You may also want to designate an adult child to administer your estate, to replace a sibling or family friend you previously appointed.

Laws Change

The laws affecting your estate plan may change. Perhaps your estate plan was set up when the federal estate tax exclusion was significantly lower. Now that the exclusion has been increased to $5.34 million, your plan may be overly complex. Estate plans for married couples often utilize credit shelter trusts in order to take full advantage of each spouse’s exclusion (upon the death of the first spouse, the credit shelter trust is funded with assets having a total value equal to the deceased spouse’s available exclusion amount). A possible drawback to credit shelter trusts is their restrictive nature – the surviving spouse does not have unfettered access to these assets. In light of the increased exclusion, this arrangement may no longer be necessary or desired.

Asset Acquisition/Disposition

A periodic review will help ensure that all of your assets are titled properly. Neglected and erroneously titled assets can frustrate the purposes of an otherwise comprehensive estate plan. The acquisition of assets may also necessitate restructuring the tax planning features of your estate plan.

Gifting

Much of estate planning focuses on organizing assets and making arrangements so that, upon death, they are transferred to your beneficiaries.  As time goes by, it may make sense to shift that focus to make lifetime transfers of certain assets. If you own assets in excess of the current estate tax exclusion amount, lifetime gifts are a great way to reduce or potentially eliminate federal estate taxes. Currently, you may gift up to $14,000 each to any number of persons in a single year without incurring gift taxes (married couples may combine this amount to give up $28,000 to each person per year). You may also make unlimited payments directly to medical providers or educational institutions on behalf of others, for qualified expenses, without incurring any gift taxes. Gifts like these can reduce the size of your estate and, by extension, your estate tax exposure.               

Contact your estate planning attorney at Warner Norcross & Judd to discuss whether it’s time to update your estate plan.

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