With current estate tax laws to sunset at the end of 2025, conversations about estate planning are more important than ever. Potential changes could impact how your assets will be taxed and distributed, making it essential to review your estate plan sooner rather than later. Estate planning is an ongoing process that requires periodic reviews to ensure your wishes will be honored. The following are examples of events and situations that typically require updates to your estate plan:
- Life Changes: Major life events, such as marriage, divorce, the birth of a child, or the death of a loved one, can impact your estate plan. For example, you might need to update beneficiaries, revise guardianship arrangements for minor children, or adjust the distribution of your assets.
- Legal and Tax Updates: Estate tax laws and regulations can change. These changes might affect how your estate will be handled or how much your heirs will pay in taxes. For instance, if Congress does not act by December 31, 2025, the estate tax exemption could be reduced by approximately 50%.
- Balance Sheet Changes: As your assets change, your estate plan should reflect these changes. Whether you buy a new property, start a business, or add investments, it’s important to make sure these assets are properly addressed in your plan.
- Beneficiary Designations: Regularly check that beneficiary designations on accounts like life insurance and retirement plans align with your will or trust to maintain consistency with your overall estate plan.
- Estate Management and Decision-Making Documents: Regularly review documentation of executors and trustees. Both are vital in managing your estate and fulfilling your wishes. Executors distribute assets as per your will, while trustees handle trust assets. Additionally, review your healthcare directives and power of attorney to ensure the appointed individuals are still appropriate.
Most of our clients ask how often they should review their estate plan regardless of major life and/or financial changes. Each situation is unique, but it is a good practice to review your estate plan every three to five years. Consulting with an estate planning attorney and your financial advisor can help ensure that your plan remains effective with current laws. Being proactive with your estate plan helps to ensure that it will continue to serve your needs and wishes, providing clarity and security for you and your loved ones.