Happy New Year and Congratulations!

At some point in the past you have taken the necessary steps to create an estate plan that protects your loved ones and your family’s financial future. Whether you are from Orange County, Southern California, or somewhere else in the country, you are ahead well ahead of the curve. Surprisingly, two-thirds of individuals in the United States have not done any type of estate planning.

However, in this new year do not let your sense of security be a false one. Once you’ve executed your estate planning documents and stored them in a safe place, you may think that the whole issue is out of sight and out of mind. Yet, you still need to review your plan annually to ensure it continues to reflect your unique needs and achieve your goals for your family’s future. People, families, finances, and laws frequently change. One great New Year’s resolution should be to review your estate planning to determine and consider whether your estate planning needs to be adjusted in response.

Here are seven things that can trigger the need to review your existing estate plan:

Family Changes. Marriage, divorce, birth and death are significant life changes that should prompt an estate plan review. If one of your beneficiaries dies, you will need to remove them from your estate plan. A new child or grandchild likely means adding new beneficiaries. If your daughter gets a divorce, you will likely want to remove her ex from your estate plan, but still include their children. These circumstances may also trigger changes to your guardian, executor, or health care agent appointments.

Health Changes. Your health condition may dictate changes to your estate plan. If you suddenly need long-term care, you should provide instructions on the kind of care you want—a senior living facility or in-home help. Changes to the health of an executor, guardian, or trustee are yet another reason to modify your estate plan. Consider the age, mental capacity, and potential infirmity of the persons appointed to serve in these positions. On the other hand, if it has been awhile since you reviewed your will or trust, your children may now be old enough and capable to serve as the executor or successor trustee of your estate.

Work Changes. Retirement should prompt an estate plan review, because retirement should likewise prompt a review of your finances. Since the source of your revenue will be changing, it is a time to review with your financial advisor or life insurance agent alternative means to supplement your income. Since in retirement, individuals usually take more from their nest egg than they contribute to it, is also a time to ensure that the value of your assets are maximized and planned for in a way that is most beneficial to your loved ones.. Or, if your income level or income requirements change, this should also prompt modifications to your estate plan.

Market Changes. If the total value of your estate has fluctuated by approximately 20 percent, this should trigger an estate plan review. With great gains comes great taxes. A significant gain could provide you with assets that would incur significant taxes upon your death.   Fortunately, there are strategies available to avoid that risk. Reviewing your estate plan with a trust and estate planning attorney can help develop ways in which to plan around it. For example, it might be advantageous to gift to children or grandchildren during life to reduce or remove estate taxes. You may wish to create a trust to take advantage of a step-up (or two steps up) in the cost basis as it pertains to capital gain tax. Or, for higher net-worth individuals, it might be best and most tax efficient to set up an irrevocable life insurance trust (ILIT) or a charitable remainder trust (CRT).

Location Changes. If you move to a different state from where you originally executed your estate planning documents, you should review your plan to make sure it conforms to the law of the state where you currently live. The laws for creating a will or trust vary in each state, so it’s important to ensure that your documents continue to honor your wishes. Additionally, if you own or acquire property in a state different from where you live, that property may be subject to probate in the state it is located. To avoid the hassle of an out-of-state probate process, you can place this property in a trust. Lastly, your proximity to trusted people, such as those you named as trustees or guardians of your children, may have changed. Depending on the need to have them close by, it might require a review of those selections.

Law Changes. The law changes all the time, and new state probate and tax laws could impact your estate planning documents. You should alter your documents to take advantage of any legal changes that could benefit you, or review your plan so that these changes do not adversely impact your estate.   For example, the federal transfer tax exemption amount will increase in 2016 to $5,450,000, meaning that individuals may transfer up to this amount without being subject to federal transfer taxes. Take note that state law transfer tax exemptions differ depending on the state where you and your assets are located.

Personal Changes. The passage of time alone may lead to a change of opinion as to who you want to serve as executor or trustee, or the persons you have named as beneficiaries. People may have died or moved away, you may have had a falling out with a beneficiary you named years ago, or you may now believe that your grandchildren would benefit more from a gift than your children.  

To review an existing estate plan, or create a new one, call our office today in Irvine, California to schedule an Estate Plan Review. The consultation with our trust and estate planning attorney is complementary to encourage a candid conversation to help you identify the best strategies to plan to protect the family you love.

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