Q. My wife and I created our estate planning documents about 15 years ago and we really have not even looked at them since. Do you have any thoughts about when we should consider updating them?
B. Yes, I do. I would tie a review and update into a New Year’s Resolution. Many of us resolve to eat healthier and exercise more in the New Year. I would suggest another resolution: persons who have not created an estate plan should resolve to create one; and those who have already created one, such as yourself, should resolve to update them as need and changes in the law may require.
A very basic estate plan would typically consist of the following legal documents: a “Living Trust”, and a backup Will, Durable Power of Attorney, and an Advance Health Care Directive for each of you. These documents are designed to be reviewed, modified and updated as circumstances change. Benchmarks for updating these documents might include the following: changes in family structure, such as by births, deaths, divorces and marriages; changes in the ability to manage one’s own finances and/or the onset of incapacity; the need for long-term care; the disability of a child; and changes in tax law.
However, as much as we encourage clients to review and update their estate planning documents, too few actually take that advice. In this regard, I have seen wills of deceased parents, prepared two or three decades earlier, which still refer to their children as minors, and others that mention only one child when the parents subsequently had more children. Outdated documents can sometimes be more problematic than none at all.
If it has been many years since you created your documents, you very likely have provisions in them which were designed with old tax law in mind, and that would now make administration of your estate unduly cumbersome. I refer, specifically, to the common practice years ago, when the estate tax exemption was $1 million per person or less, of requiring asset splitting and sub trust funding at the first death in order to minimize the estate tax bite. Now, with the federal estate tax exemption set to expand in year 2022 to more than $12 Million per person ($12.06 Million for persons dying in 2022), and the corresponding option afforded married couples to double that amount, the need for burdensome sub-trust funding is no longer necessary for most couples. If your 15 year-old plan falls into this category, you may wish to modify it to eliminate this requirement and make trust administration easier for the survivor. Do note, however, that this boost in the Federal Estate Tax Exemption currently “sunsets” at the end of year 2025. What the exemption will be thereafter is presently unclear.
For those who have not created an estate plan, I would encourage them to do so at the earliest opportunity. Sometimes setting a specific calendar deadline is helpful, such as taking steps to create a plan and have it in place by March 31 of the coming year.
The New Year is a time for renewal. Let’s add getting your legal affairs in order to your other resolutions. Your elder law or estate planning attorney can assist you in crafting an appropriate plan to meet your present circumstances.