With a new year comes those recurring resolutions to exercise more and eat less, save more and spend less and so on. An important one that’s often overlooked, however, is reviewing your estate plan.
I often compare your estate plan to the home you choose for yourself and your loved ones. In estate planning we are building a house that represents our hopes and dreams for the future. But unless it’s built on a solid foundation, the house won’t provide the safety and shelter we seek. The new year represents an opportunity to inspect that foundation to ensure it isn’t cracking anywhere.
#1 Life’s downs/4 Ds. If you experienced any of the four Ds in 2015—death, divorce, debt or disability—it’s important to review (and probably update) your estate planning documents. Look at how those changes may affect who you name (or what you want) in your healthcare and financial powers of attorney and who and how you want to provide for them in your will or trust.
#2 Life’s ups. Life’s happy developments are also cause for reviewing your estate plan. Think marriage, acquisition of a business or the birth of a child or grandchild. This year was especially significant for same-sex couples who gained the right to marry. Those big life events signal a time to update your estate planning documents.
#3 Other new circumstances. Whether adjusting for life’s ups, downs or any other changes, don’t forget to double-check who you have identified as beneficiaries on insurance and retirement accounts. Perhaps you have a sick family member or a loved one who has fallen on hard times. The beneficiaries listed are the people and organizations who will receive those funds, regardless of what you state in your will or trust. Now is a good time to determine whether you want to redirect any of those bequests, whether directly to certain beneficiaries or to the trustee of any trust you may already have or be creating.
#4 Federal “Fiscal Cliff” legislation. ATRA (American Taxpayer Relief Act of 2012)—sometimes known as the fiscal cliff legislation—was enacted at the very beginning of 2013 to fill gaps in the tax laws as of 2012. This new law significantly reduced the number of families who will be impacted by estate taxes, so a plan that prioritizes estate tax savings over minimizing the other sorts of taxes will miss some key opportunities. If you established your estate plan prior to that time, it’s important to review it now in light of these changes.
#5 Wisconsin Trust Code and Medicaid Law revisions. Revisions to the Wisconsin Statutes enacted in mid-2014 affected laws related to trusts and to the Medicaid program. Estate plans formed prior to that time were developed based on trust laws and assumptions about Medicaid and long-term care planning that no longer apply.
#6 ABLE Act. This one is big news on the special needs planning front. The ABLE (Achieving a Better Life Experience) Act, was enacted last year so people with special needs children under age 25 can set up tax-free accounts to cover education, housing and transportation expenses for their children. While this option may not eliminate the need for supplemental needs trusts for such beneficiaries, 2016 will be a good time to examine whether this tool can be beneficial to families caring for disabled young people.
To see how these changes may affect you, see your estate planning attorney. And to ensure your estate plans are consistent with your financial and tax planning, see your financial planner or tax adviser. (If you don’t already have a relationship with one or both of the latter, your estate planning lawyer can help you find one that’s right for you.)