Estate planning can be complicated. You have to contemplate your mortality and decide what to do with all your stuff. Then you have to meet with an attorney and go through the process of trying to communicate those wishes in documents according to local laws. This is why I’ve only seen a few clients that have actually updated or reviewed their documents with their attorney. Here are 5 reasons to update your estate plan right now.
1. You Moved to Another State
The principles of estate planning are the same in every state. You want to get your estate in order so that when you die, your stuff goes to the right people or organizations with minimal costs and taxes. That may not happen if you recently moved to another state. State laws differ when it comes to property rights of spouses, children, and estate and inheritance taxes.Â If you’ve recently changed residency to a new state your current documents may not execute your wishes under the new state’s laws. Ask your attorney if you need to update your documents to reflect the new state’s laws.
2. You Haven’t Updated Them in a Long Time
Laws change. According to IRS.gov in 1999 the estate tax exemption was only $650,000. The highest estate rate was 55%. The exemption increased to $1,000,000 in 2002, $1,500,000 in 2004, $2,000,000 in 2006, and $3,500,000 in 2009. It’s now at $11,700,000 in 2021 after doubling in the Tax Cuts and Jobs Act.Â Estate tax rates have fallen from 55% to their current level of 40%. Under the Build Back Better Act, if passed, the new law would roll back the exemption to about $6,000,000. If you created your estate plan over 10 years ago, or if your assets have grown to levels impacted by the exemptions, you should consider reviewing your documents with an attorney.
3. Your General Power of Attorney has Passed Away
Obviously, that goes for any acting agent named in your documents. But especially for retirees, if you’ve named someone in your documents that is significantly older than you and/or has passed away, you should update your power of attorney document. Be sure to that you have good back-ups to your primary agent as well.
4. Your Health Care Power of Attorney Moved or You Moved
If the person you’ve named as your health care power of attorney moved to another state. He or she may not be readily available to serve your needs in an emergency. The same goes if you’ve moved. Review your agents with your attorney to determine if you are still comfortable with your current agent, or if you should update him.
5. One of Your Beneficiaries now has Special Needs
If you have a beneficiary that is now considered to have special needs, you should update your estate plan immediately. This even goes for dependency special needs cases. Either way, giving someone with special needs a large estate can disqualify them for public benefits. Giving a large inheritance to someone with dependency special needs can lead to premature death. Either way, if you have a beneficiary with special needs, you should update your estate plan with an attorney that specializes in special needs trusts.
Estate planning is complicated. Most people do it and forget about it. That’s not always a good use of your money. If you’ve encountered any of the 5 reasons above, update your estate plan right now.