Estate planning triggers: When to re-evaluate your estate planning strategy

Estate Planning Triggers: When To Re-Evaluate Your Estate Planning Strategy | Bankrate.com

Estate planning triggers: When to re-evaluate your estate planning strategy

As life happens and things change — and as you pass big milestones getting married, having children or retiring — your estate plan and will should change too.

“Once a person reaches the age of 18, they should at least have powers of attorney to designate who will make their healthcare decisions and handle their finances in the event of disability,” explains Jennifer Guimond-Quigley, the Chicago-based managing attorney of her eponymous firm focused on family law, estate planning and administration. “Once a person begins accumulating assets and having children, it’s vitally important to have an estate plan in place.”

The risk of not having a current estate plan and will that reflects your wishes is great. “When individuals do not put any plan into place, it leads to confusion, chaos and unintended consequences,” she says.

Think of this as your starter guide to keeping your estate plan up-to-date, using these important life events as triggers to remind you to discuss your current situation with a trusted attorney.

Getting married

Most ly you and your future spouse have had some financial conversations before getting engaged, but if not, once wedding plans are in place, it’s important to discuss all facets of each partner’s financial landscape and the desired distribution of assets.

A couple needs to determine if they want a prenuptial agreement, the totals of their separate and joint assets and who they want their assets to go to in case one or both spouses should pass away.

“Based off of these factors and the prenuptial agreement, an estate plan that satisfies both parties will need to be created,” explains Guimond-Quigley.

Starting a family

The decision to have a child is a big — and joyous — occasion, and it comes with the responsibility of planning for that child’s care as long as he or she is a minor.

“We’ve been shocked at how few parents have wills in place, because they’re so young,” says Jenny Xia Spradling, co-founder of FreeWill, a site that creates wills and trusts at no cost. “Even if you don’t have so many assets, a will takes care of things and specifies who will take care of your children if you pass.”

You and your partner will want to decide if and how much of your assets will go to your children in the case of a death, at what age your children will inherit those assets and choose a legal guardian.

You can also work with your lawyer to determine when your child/children will receive those assets, either all at once or over a period of time. “Not having a guardian designated for minor children can mean that a judge who doesn’t know your family gets to decide who will care for your children,” says Guimond-Quigley.

When one of her clients passed away, he left his wife and children behind. Some of his accounts with no beneficiary designated had to be distributed 50 percent to the wife and 50 percent to the minor children to comply with the intestate inheritance laws.

“That meant that the mother had to be appointed the guardian over the funds for the children and report to the court how those funds were being utilized for them on an annual basis,” Guimond-Quigley recalls.

“Had her husband simply executed a will naming his wife as 100 percent beneficiary as he ly intended, a guardianship would never have been necessary.”

Divorce

If a couple decides to uncouple, it’s vital to update the now-separate estates. When one of Guimond-Quigley’s clients neglected to change the beneficiary designations for her trust after getting divorced, disaster ensued.

“It resulted in her ex-husband getting the life insurance that was supposed to be paid out to the trust to provide liquidity to pay off debts and administration expenses.

As a result, the estate was insolvent and the house her husband wished to continue residing in had to be sold. She would never have wanted that result,” she says.

“Not only is it important to plan, but it’s important to follow up with any additional steps after the plan is in place, such as funding of trusts, to ensure it works the way it should.”

Enjoying retirement

When setting up a retirement fund such as 401k or a Roth IRA, beneficiaries are named upon setting up the account. This means that there’s a chance the beneficiaries on the respective retirement accounts could be decades old. So, the retiree should look at their total retirement assets and update their beneficiaries to reflect their current relationship and financial landscape.

Other life events

The reasons why you should re-evaluate your estate plan are almost endless, but Guimond-Quigley points out that there are a few rules of thumb to consider.

“Any substantial change in assets, a move to another state or country, the death or disability of a person named in their current estate plan, a change in tax laws, a disability of a beneficiary that arises after the initial plan is executed, and/or the birth or death of a child are all important life events that could trigger a revision of a person’s estate plan,” she says.

Learn more:

Источник: https://www.bankrate.com/personal-finance/when-to-evaluate-estate-plan/

When to Update Your Estate Plan

Estate planning triggers: When to re-evaluate your estate planning strategy

If you already have an estate plan, you’re ahead of the majority of Americans. According to a survey by Caring.com, more than half of people don’t have a will or living trust. Even if you have your estate documents in order, you’re not done.

Chances are you’re still many years away from needing to put your end-of-life plan into motion. There are still many changes in your life that need to be reflected by updating your documents. It’s an essential part of making sure everything is in order for your family and heirs.

Having an updated estate plan not only takes care of your loved ones financially but it ensures everyone knows your last wishes. It can save a lot of emotional stress after you’re gone and assures your family that they’re handling your estate in the way you would it handled.

But what should you update and how often? How do you know if there is an essential piece that you’re missing from your estate plan? Let’s dive in.

What You Should Update

What you need to update depends on what you already have as part of your estate plan. The more comprehensive the plan, the more documents will need to be reviewed and updated. While you should certainly review your will, that is not the only thing that should be on your list.

There are many different documents that can comprise your estate plan, depending on the complexity and size of your estate. Some of these documents include your will, a living will, a revocable living trust, power of attorney, a digital estate plan, and more.

Your estate can also include a variety of financials such as a life insurance policy, retirement plans as well as business plans if you own a business. If your will is the only piece of your estate plan you have in place right now, you may want to consider adding on to it.

Talk to an estate planning attorney or a qualified financial advisor about what makes sense for your particular estate. Consider what you would to happen with all of your property and money, and how you want it handled.

Use that to create an end-of-life plan that addresses all of your wishes and ensures your heirs will know what to do once you pass away.

When You Should Update Your Estate Plan

It’s recommended that you update your estate plan documents every three to five years or after any major life changes. If you have many different documents in your estate plan, getting it all updated can be quite an undertaking.

To make the process easier, it’s always best to update all necessary documents as things change. This way you only revise what needs to be changed rather than going through everything and making lots of updates every few years.

However, if you haven’t updated your estate plan in a while, it may be time to just go for it. Sit down and review everything that is part of your end-of-life plan to ensure it’s current. In addition, do an audit to make sure that you have all necessary documents as part of your estate plan.

If you find any holes, talk to an estate planning attorney about how you can fill in the gaps and protect your assets. This can be especially important if there are multiple interests that could cause conflicts with the distribution of your assets.

As you look at your estate plan, you want to make sure your intentions are still the same. Are the right people included? Are all major changes reflected? In addition, here are the most common reasons to review and update your estate plan:

Marriage and Divorce

Major changes to your marital status are an important reason to review your estate plan. Whether you’ve just tied the knot or parted ways with your spouse, each one is a major change to your family’s dynamics.

This kind of change should be a trigger for reviewing your documents. Make sure your new spouse is included in your estate plan and your ex-spouse is removed from it. Do this as soon as possible after your divorce to ensure your money is in line with your wishes.

There is no legal requirement to change your estate plan after a divorce or marriage. You don’t have to remove or add a spouse but it would make things easier down the road. In addition, you don’t have to be married to your partner to add him or her to your documents.

If you and your partner are not legally married, he or she may not get anything from your estate upon your death. This is true both in the case of a domestic partnership or a common law marriage.

To ensure your partner is taken care of in the event of your death, the best thing you can do is add them to your estate planning documents. This way there is no question that you wanted part of your money or property to go to your partner.

Children

When you have a new baby, it’s good to add them to your estate plan. You want to make sure they’re taken care of in case something happens to you and/or your spouse. The best way to do that is to update your documents with the new addition to your family.

If you’ve remarried and had children from your first and second marriage, you will want to address this in your estate plan. This also goes for any stepchildren that you would to include in the distribution of your estate.

Stepchildren are not usually included in your estate plan, however biological and adopted children are part of it. If you want to disinherit a child or a spouse, this will need to be spelled out in your plan as well.

Provided this is something you would to pursue, make sure you talk to an estate planning attorney. There are laws that govern inheritance in every state so you want all of your documents to be legally binding if your wish is to disinherit a member of your family.

Ensure that there is a guardian named for your children if you were to pass away. Every few years, look at who you’ve named as the guardian for your kids in case you pass away to make sure you still want this person to fill the role.

If your children have reached the age of 18 or the age of majority in your state, they no longer need to have a guardian or personal representative. If there have been any changes to the guardians, personal representatives or trustees, make sure those are reflected in your plan.

Changes to Beneficiaries

If you want to add or remove beneficiaries, review all documents within your estate plan to ensure the changes are made across the board. Even if you set up the beneficiaries with your retirement plan provider, you need to ensure that the rest of your estate plan aligns with your wishes.

If any of your beneficiaries have passed away, you need to update all documents to reflect the changes. Look at the distribution of your assets and decide how to revise it the current beneficiaries.

This is especially important if you have beneficiaries who need special care. Make sure your estate documents outline how to care for any beneficiaries who require special care or have special needs.

Tax Changes

Unfortunately, the tax law is constantly changing so this is something you will need to take into account with estate planning. Also, if you move from one state to another or even one country to another, make sure your documents follow all local and state laws.

Consult with a local estate planning attorney who can go over everything with you and advise you on any changes you will need to make. Keep in close contact with your attorney so you can check in periodically as the laws change.

Depending on the size of your estate, it may make sense to set up a trust to shield some of your assets from taxes. In 2019, if your estate will exceed $11.4 million or if your combined estate with your spouse exceeds $22.4 million, you may have federal estate taxes due. This is something you will want to discuss with your attorney and financial advisor.

Other Considerations

Here are some other considerations as you’re looking at updating your estate plan. Consider updating your estate plan in any of these situations:

  • Do you want to make changes to your trust? If you have a revocable living trust, you should review it periodically to ensure you still want to keep the same person as the trustee. Consider adding a successor trustee or a substitute trustee. Regularly check your trustee list to make sure it’s up-to-date and accurate.
  • Do you want to make changes to your power of attorney? No matter the type of power of attorney you have, it’s important to check it regularly to ensure that your wishes are reflected. This includes both durable power of attorney and healthcare power of attorney. You can always revoke any of these and name a new person to have that power on your behalf.
  • Do you have a living will? If you have a living will already, make sure it’s up-to-date and it contains everything you want outlined clearly. If you don’t have one, get it set up as soon as possible. If you’ve changed your mind, make sure to update the document with the changes.
  • Do you have a business plan in place? If you own a business, you need a succession plan to ensure it continues running after your death, if that is your wish. If you would prefer to have the business sold when you pass away, you need to outline that as well.
  • Have you bought or sold any property? If you’ve bought or sold a second residence or other property, make sure the changes are reflected in your estate plan. Also, if you own homes, investment property or tangible property in two or more different states, consult with an estate planning attorney.

Why You Should Update Your Estate Plan

As you’ve gone through each section, you probably have a good idea as to why it’s important to keep your estate plan up-to-date at all times. This way you can ensure your wishes are carried out once you pass away.

Make sure you update all documents soon after any major life change – both positive and negative. Also, if you change your mind about any of the documents within your estate plan, those will need to be updated as soon as possible.

An estate planning attorney can help you draft and also update any documents. This ensures everything is legally binding and reflects your wishes. Don’t count on telling your family and friends about your wishes – just include them in your estate plan and make them legal.

If you pass away before your estate plan documents are updated, you risk your assets being distributed in a way that you wouldn’t want. For example, if you get a divorce and pass away before your will is updated, your ex-wife may be entitled to some of your assets.

This is why it’s important to make big changes as they happen rather than waiting to update your plan every three to five years.

The Bottom Line

Having an estate plan in place can give you incredible peace of mind. It can be very helpful to know that if something happens to you, your family will know how you want everything distributed.

Also, if any of your wishes have changed or if you want to disinherit a member of your family or change the guardianship of someone under your care, having a plan is very important.

Take the time to do your research and talk to a qualified financial advisor or an estate planning attorney to ensure your estate plan documents comply with local laws.

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This is a post from Clint Haynes, a Certified Financial Planner® and Financial Advisor in Kansas City, Missouri. He is also the founder and owner of NextGen Wealth. You can learn more about Clint at the website NextGen Wealth.

Источник: https://www.nextgen-wealth.com/blog/updating-your-estate-plan

5 strategies for estate planning to get you started protecting your family and funds

Estate planning triggers: When to re-evaluate your estate planning strategy

You may think estate planning is just for the wealthy. Affluent people have more assets, true. But they aren't the only ones who benefit from thinking about what they will pass on to their loved ones and how to make that transfer as smooth as possible.

Without an estate plan, it can be more difficult, time-consuming, and expensive for heirs to handle your financial accounts, property, and other assets, making sure everything is distributed in the way you wanted it. 

Making a will is a good first step. But an “estate plan” — really just a fancy term for getting your affairs in order — goes beyond that. It not only communicates your wishes, it organizes your finances to ensure that your estate — essentially, everything of value that you own — is handled as fairly and tax-efficiently as possible. 

Estate planning doesn't just involve what happens after death, either. It can also cover a situation in which you are severely incapacitated, either physically or mentally, and unable to make decisions.

Here are five estate-planning strategies and key moves to keep in mind for your funds and your family. 

1. Select key players to carry out your estate plan

If you've drawn up a will, you've named an executor to it. But an important part of your estate planning process is deciding who will help you fulfill your wishes potentially while you are still living, as well as after death. These roles include appointing a:

  • Durable power of attorney (POA). This person steps in to make financial decisions on your behalf if you are temporarily or permanently unable to make those decisions independently. 
  • Health care power of attorney. This person steps in to make medical decisions on your behalf if you are temporarily or permanently unable to make those decisions yourself. It can be the same individual as the regular POA, or a different person.
  • Guardian. If you have minor children when you pass away, the guardian will raise your children and make decisions about where they live, go to school, and other activities.

Carefully consider who you want in each role and discuss it with them to ensure they are willing and able to step into the role when needed. Then have a document officially naming them drafted, signed, and notarized. 

2. Select or review the beneficiaries on your retirement accounts

The bulk of many people's holdings are in retirement accounts, 401(k) plans and IRAs. A beneficiary is a person (or persons) who inherits the money in the account after your death. 

Naming a beneficiary might seem a formality. It's not. 

It's a legal designation that directs the account's custodian/administrator (the financial firm holding or managing it) how to release the funds. Part of the contract between you and the custodian, your beneficiary designation trumps anything or anyone named in your will. So selecting your beneficiary is important.

You may well have named a beneficiary when you established your account — it's usually part of the paperwork.

But it pays to review it, and update any time you have a major life event, such as a marriage, divorce, or death in the family.

If you leave as a beneficiary a now-ex-spouse, your heirs will have a major battle to stop the funds from going to them, and they'll still probably lose.

If you don't have any living beneficiaries named when you die, your retirement account can wind up in probate court, and the court will decide how to distribute it — a messy, time-consuming procedure. 

3. Familiarize yourself with the federal and state “death taxes”

The federal estate tax impacts a very small (and wealthy) segment of the population, but it's still a good idea to familiarize yourself with it — especially since the regulations are changing in the not-too-distant future.

When someone dies, the federal government imposes a tax on their estate's value. In the eyes of the IRS, the estate includes all the cash, real estate, investments, business interests, and other assets owned by the deceased person when they passed away. The tax applies to, and is paid by, the estate — not those who inherit it.

The estate tax only kicks in for estates of a certain size — above a certain exemption amount, in IRS-speak.

For 2021, the federal estate tax exemption is $11.7 million per individual estate ($23.4 million for a married couple's, if they die together). However, the current exemption expires on Jan. 1, 2026. At that point, it will revert to its pre-2018 level of $5 million for individual estates ($10 million for married couples), adjusted for inflation. 

It still sounds a lot, but bear in mind that an estate encompasses all your assets. If you've a business to bequeath, a six-figure life insurance policy, or property that's appreciated a lot, your taxable estate could well hit that $5 million.

In addition to the federal estate tax, 12 states and the District of Columbia impose an estate tax.

Six states also impose an inheritance tax, which directly taxes heirs rather than the estate. So it's a good idea to familiarize yourself with the estate or inheritance tax laws and exemptions in any state where you live or own property.

4. Take advantage of the annual gift tax exemption

One way to avoid the estate tax when you die is to give away money while you're living.

The annual gift tax exclusion allows you to give up to $15,000 per person per year free of  – no need to report the gift. Married couples can give $15,000 each, meaning together they can give a total of $30,000 per person per year.

If you give more than that amount, you don't necessarily have to pay taxes on those gifts, but you do have to file a federal gift tax return. Also, those gifts count toward your lifetime estate exemption limit. For example, if you give someone a $30,000 gift, your lifetime exemption amount would be $15,000 lower because that's how much of your gift exceeds the annual exclusion. 

If you want to make a bigger gift, you can contribute up to $75,000 to a 529 college savings plan in one year and elect to treat it as if you made it over five years.

Other ways you can give money to loved ones without triggering the gift tax include:

  • Gifts to your spouse (capped at $159,000 in 2021 if your spouse is not a US citizen)
  • Tuition payments made directly to the educational institution
  • Medical expenses paid directly to the medical facility

5. Establish a trust

Another way to pass wealth smoothly to your heirs and bypass taxes is to establish a trust. Tailored to meet different estate planning needs or goals, the major types of trusts include:

  • Revocable trust: A revocable trust, aka a living trust, can be altered or canceled at any time. When you put your assets in a revocable trust, you get to keep any income they earn, and control over them. After your death, assets transfer directly to the beneficiaries you name in the trust — they won't have to go through probate, as they would if bequeathed in a will. They will count as part of your taxable estate, however.
  • Irrevocable trust: An irrevocable trust works the same as a revocable one, but it can't be modified or terminated without the permission of your beneficiaries. After transferring assets into the trust, they are no longer part of your estate, so they won't be subject to estate tax.
  • Grantor retained annuity trust (GRAT): If you own stock that you expect to increase in value, you can put it in a grantor retained annuity trust. This gives you the right to receive an annuity over the trust's term, typically two to five years. After that, the stocks in the trust are distributed tax-free to your beneficiaries. However, if you die during the GRAT term, the assets are still included in your estate.
  • Irrevocable life insurance trust (ILIT): You fund an ILIT with a life insurance policy, and the trust is both the owner and beneficiary of the policy. When you die, the trust collects the policy's death benefit and pays it out to your beneficiaries. Life insurance benefits are always free of income tax; putting them in a trust also effectively frees them from counting towards estate taxes as well.
  • Charitable remainder trust (CRT): A charitable remainder trust allows you to get a partial tax deduction for contributions to the trust. While you're living, you can receive income from the trust. At the end of the trust's term, any remaining trust assets are distributed to one or more charities or non-profit organizations that you name.

The financial takeaway

Some estate-planning strategies are simple to execute. Others, such as establishing trusts, need to be done carefully and precisely — with the help of a trusts-and-estate attorney or another financial professional.

The important thing is to get started now. And remember: Estate planning isn't a one-and-done proposition. The decisions you make this year may not meet your situation five years from now. 

Even if your life or finances haven't federal and state laws and exemption amounts do. That's why it's important to review your estate plan regularly. 

I'm a financial planner, and there are 4 estate-planning mistakes I see people make over and over

Источник: https://www.businessinsider.com/estate-planning-strategies

Estate planning triggers: When to re-evaluate your estate planning strategy

Estate planning triggers: When to re-evaluate your estate planning strategy

As life happens and things change — and as you pass big milestones getting married, having children or retiring — your estate plan and will should change too.

“Once a person reaches the age of 18, they should at least have powers of attorney to designate who will make their health-care decisions and handle their finances in the event of disability,” explains Jennifer Guimond-Quigley, the Chicago-based managing attorney of her eponymous firm focused on family law, estate planning and administration. “Once a person begins accumulating assets and having children, it’s vitally important to have an estate plan in place.”

The risk of not having a current estate plan and will that reflects your wishes is great. “When individuals do not put any plan into place, it leads to confusion, chaos and unintended consequences,” she says.

Think of this as your starter guide to keeping your estate plan up-to-date, using these important life events as triggers to remind you to discuss your current situation with a trusted attorney.

Starting a family

The decision to have a child is a big — and joyous — occasion, and it comes with the responsibility of planning for that child’s care as long as he or she is a minor.

You and your partner will want to decide if and how much of your assets will go to your children in the case of a death, at what age your children will inherit those assets and choose a legal guardian.

You can also work with your lawyer to determine when your child/children will receive those assets, either all at once or over a period of time. “Not having a guardian designated for minor children can mean that a judge who doesn’t know your family gets to decide who will care for your children,” says Guimond-Quigley.

When one of her clients passed away, he left his wife and children behind. Some of his accounts with no beneficiary designated had to be distributed 50 percent to the wife and 50 percent to the minor children to comply with the intestate inheritance laws.

“That meant that the mother had to be appointed the guardian over the funds for the children and report to the court how those funds were being utilized for them on an annual basis,” Guimond-Quigley recalls. “Had her husband simply executed a will naming his wife as 100 percent beneficiary as he ly intended, a guardianship would never have been necessary.”

Divorce

If a couple decides to uncouple, it’s vital to update the now-separate estates. When one of Guimond-Quigley’s clients neglected to change the beneficiary designations for her trust after getting divorced, disaster ensued.

“It resulted in her ex-husband getting the life insurance that was supposed to be paid out to the trust to provide liquidity to pay off debts and administration expenses.

As a result, the estate was insolvent and the house her husband wished to continue residing in had to be sold. She would never have wanted that result,” she says.

“Not only is it important to plan, but it’s important to follow up with any additional steps after the plan is in place, such as funding of trusts, to ensure it works the way it should.”

Other life events

The reasons why you should re-evaluate your estate plan are almost endless, but Guimond-Quigley points out that there are a few rules of thumb to consider.

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“Any substantial change in assets, a move to another state or country, the death or disability of a person named in their current estate plan, a change in tax laws, a disability of a beneficiary that arises after the initial plan is executed, and/or the birth or death of a child are all important life events that could trigger a revision of a person’s estate plan,” she says.

Источник: https://www.foxbusiness.com/personal-finance/estate-planning-triggers-when-to-re-evaluate-your-estate-planning-strategy

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