This might not even be on the top of your priority list but it is something that is very crucial to your and your family's well-being. This resolution can be accomplished pretty easily and should not be very time consuming as long as you are familiar with you existing documents and know what you want.
Estate Planning has always been described as an ongoing journey for those who put together any type of plan, be it a will or a trust. The reason for this is that change is inevitable. People’s family circumstances change, be it the birth of a child, a new marriage or a divorce. People’s relationships and values change over time. People’s wealth changes over time. Therefore, by making a resolution to look into and review your existing estate planning documents simply to make sure that they are still consistent with your wishes, desires and your current situation, you will be protecting yourself and your loved ones.
Below are the most important points to look at when reviewing your documents at the beginning of each year:
Have you just had a child? Did you get married? Was there a divorce or a death in the family? Did you receive a substantial inheritance or won a lottery? Did you just start a new business? Births, marriages, divorces, deaths in the family should lead you to review of your estate plan. The birth of a child or a new marriage will ensure that there is a beneficiary outside of your estate plan that you likely would like to provide for. Death of a loved one has the opposite effect but will also cause a need for your estate plan to be reviewed. Divorces will naturally cause a huge change in family circumstances and create a need for revision of your estate plan to echo the changes in your family circumstances. If changes to the estate plan are not made in the above circumstances, you are essentially disinheriting your own child and new spouse. If you do not make changes post divorce, your ex-spouse, if they were named as beneficiary, will receive a portion of your estate, which may not be your wishes upon your passing.
Beneficiaries and Beneficiary Designations
It is very important to review your documents to make sure your beneficiaries to whom you are giving your assets upon your passing are still people you love and trust. More often than not, ex-wives, ex-boyfriends/ex-girlfriends or even friends you are no longer friends with end up receiving a big chunk of your estate simply because people fail to review and update their estate plans.
In addition to making sure your beneficiaries listed in your Will and/or Trust are still current, do not forget to review the beneficiaries you had designated as recipients of your life insurance or your retirement plan. These designations are very often overlooked by people when updating their estate planning. The last thing you want to do is update your trust to write out an ex-spouse or to disinherit a child but inadvertently leave that person as the beneficiary of your life insurance.
If someone in your family is ill and is receiving long-term care, you may want to revise your estate plan to ensure that whatever that loved one is to receive from your estate, that such an inheritance will not cause your ill loved one to lose government benefits. There are many estate planning mechanism designed to ensure that your loved one can receive his/her inheritance in such a way that does not run the risk of losing government benefits.
Purchase of Property - Real/Personal
A very common scenario is as follows: Parents put together a family trust on X date and fund all assets into the trust. Parents make their two children beneficiaries of the trust. Parents purchase a house worth $450,000.00 following the creation of the trust. Parents fail to title the house into the trust. Parents purchase an art collection worth over $150,000.00. Parents fail to title the art collection into the trust. Parents and children are under the impression that affairs are in order and that the costly, lengthy and public probate procedure will be avoided. Parents pass on. Children discover soon after that because their parents had a house worth over $50,000.00 and personal property worth over $150,000,00 that were outside of the trust, Probate will have to opened, ensuring the diminishing of their inheritance.
In California, if one has a trust in place, but has real property worth over $50,000.00 or personal property worth over $150,000.00 outside of the trust, probate will have to be opened. The latter ensures that the many benefits of having in place a trust is rendered redundant.
Portfolio Investment Performance
If the total value of your estate has increased or decreased 20% since you last reviewed your estate plan, you should probably review it again. Both you and your attorney should have an updated summary of your assets and liabilities. It is a good idea to have a discussion with your attorney regarding gifting excess assets to children/grandchildren now to reduce and/or eliminate estate taxes upon death. The latter rings particularly true if you, as a single individual have wealth that is close to the federal exemption amount of $5.43 million, $10.86 million if you are married.
The bottom line is that estate planning is not a one time thing, to be completed and never looked at again. Estate planning is journey for you and your family, reviewing which should be a part of your annual New Year’s resolution.