The Importance of an Annual Estate Plan Checkup

The Importance of an Annual Estate Plan Checkup

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By Lynne Howard, CPA/PFS, Tax Senior Manager | Family, Entrepreneur & Executive Advisory Services Team

Every year we schedule a variety of checkups with a health professional for our (and/or our loved ones), health, teeth, and eyes.  We have scheduled maintenance done on our HVAC units.  We even take our car in for an annual inspection.  We do this to make sure things are running smoothly and to hopefully prevent unexpected surprises.

Shouldn’t we give the same care to our financial health; in particular our estate plan?  If you, God forbid, “got hit by the bus” would your loved ones be well cared for and continue with the values you cherish?

Below are suggestions for your estate planning checkup and why it is important to do this annually:

First, make sure you know where your estate planning documents are located.  Having the originals makes estate administration easier.  It would be a good idea to let the persons you named as executor, trustee, or Power of Attorney (POA) know 1) that they were named and 2) where you keep your estate documents. 


The following documents should be part of your estate plan:

  1. Current Will
  2. General (Financial) POA
  3. Health Care POA
  4. Living Will
  5. Revocable Trust (if you are concerned about asset protection and avoiding probate)

*If you have not prepared these documents you should make it a priority so if something unexpected happens, your loved ones will be taken care of.


Do you really understand your estate plan? 

If you have young children, has a guardian been named, and, if so, are they still the best choice?  Do you have older children who are now married?  Do you now have grandchildren?  How have circumstances and family dynamics changed since your documents were drafted?  And last but not least, have you updated your documents recently to reflect law changes and new strategies that are constantly developing?  If not, you might be surprised to find that assets will not pass to your heirs as originally intended or will not pass in the most tax efficient manner. 

For example, your documents may have been done before portability was passed and now it would be more tax advantageous to leave everything to your spouse to get a second step up in basis. In 2017, The Tax Cuts and Jobs Act doubled the estate exemption from 5.5 million dollars to over 11 million dollars for years after 2017 through 2025, so trusts with formula clauses setting up credit shelter trusts may be receiving all of your assets with nothing going to your spouse or other heirs outright.  If your documents were drafted a long time ago when the estate exemption was only 1 million dollars, your trust provisions would likely no longer work as originally intended. 

Other changes that could significantly affect you estate plan include:

  • Your children are grown but they were young when your estate plan was done.
  • You’ve gotten married or divorced.
  • You had more children.
  • You moved to another state.
  • Your POA, Trustee, or Executor passed away.
  • You’ve inherited significant assets since the last update.
  • You have had a significant change to your financial situation since the last update.
  • You started a new business or retired.

Value Your Estate

The end of the year is good time to value your estate which can prove very helpful as you evaluate the need to update your estate plan.  We suggest that you prepare a spreadsheet listing your assets and debts and that you update this list annually.  The list should include how the assets are titled, including Payable on Death (POD), Transfer on Death (TOD), Joint with Rights of Survivorship (JWROS). Your list should aslo include the estimated value, the custodian and account number, if applicable.  Ideally, the listing will also include the contact name and phone number of the custodian, and beneficiary designations. 

Keep this asset listing along with your estate documents in a binder making it easy for your executor or personal representative to find the information needed to administer your estate as efficiently as possible.  You should also provide information about any safe deposit box and any relevant websites / passwords in this binder.  This is a good time to review your life insurance needs as well and make adjustments to your coverage.

Conclusion

It’s important to not only know where your documents are located but also what they say. It’s equally important to know how tax law changes, changes to your financial situation and family changes, like those listed above, affect your plan.  You have worked hard to accumulate your assets and want to take care of your loved ones.  A bit of organization and annual review can go a long way to be sure the plan you choose is appropriate and implemented as smoothly as possible.  As you can see, there are many reasons to do some maintenance and schedule an annual estate checkup.

Download our Financial Records Checklist

Questions on how tax law changes may impact your estate plan? We can help. Contact your Keiter Representative or Email Us | Call: 804.747.0000 to speak with a member of our Family, Executive, Entrepreneur & Advisory Services Team.

 

Learn more about estate planning:


The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


About the Author

Lynne has extensive experience in the estate, trust, and gift area, but also applies her experience to provide tax planning opportunities and insights to operating entities, investment partnerships, real estate entities, and high wealth individuals and families. Currently, she works closely with individuals and family offices to address their various tax compliance, consulting, and estate planning needs. She also serves as an advisor to her clients on matters indirectly related to taxes and estate/gift planning. Read more of Lynne's insights on our blog.

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