As estate planning lawyers, all too often we speak with people that are looking for “damage control.” They find themselves in difficult circumstances because they did not plan ahead in advance appropriately. Of course, we do everything that we can to provide assistance after the fact, but most often there is only so much that can be accomplished.
They say that the only certainties of life are death and taxes, and everybody prepares for April 15th each year. Strangely enough, the majority of adults have made no preparations at all when it comes to this other certainty. Granted, we know that tax day will come along every year, and most people go forward with the belief that the Grim Reaper is not going to pay them a visit anytime soon.
Yet, you never know what the future holds, and people of all ages pass away each and every day. Estate planning is one of the basic, core responsibilities of adulthood, and everyone should have a plan in place. And when you have a partner or spouse and/or children depending on you, the importance of planning is amplified exponentially.
Since so many people go through life without any estate planning for an extended period of time, when they finally take action, they breathe a sigh relief once and for all. The documents are placed in a drawer or a lockbox somewhere, and these individuals go forward with the idea that the matter is closed.
In fact, estate planning should be viewed as an ongoing process. There are many different things that can take place in your own life that can trigger the need for estate plan updates. One of them would be additions to your family, and of course, subtractions could also render your existing estate plan obsolete. If you get divorced, you are certainly going to want to change your beneficiary designations and adjust other elements of your existing estate plan.
Speaking of marital status changes, if you decide to get remarried after getting divorced, your estate plan will need another round of revisions. One situation that can occur is the desire to protect the interests of your new spouse as you simultaneously preserve inheritances that you want to leave to your children from a previous marriage. This type of situation can be addressed through the utilization of a qualified terminable interest property trust (QTIP).
When you establish this type of trust, your spouse would be the life beneficiary, and your children would be the final beneficiaries. If you die before your spouse, he or she would be able to receive income from the earnings of the trust and live in a home has been conveyed into it. However, your surviving spouse would not be able to change the terms of the trust when it comes to the final beneficiaries. Your children would inherit the assets that remain in the trust after the death of your surviving spouse.
Improvements in your financial status over the years and/or changes to relevant tax legislation can also create circumstances that lead to the need for estate plan revisions. In fact, we just experienced a change that is very relevant to the estate planning community. As of 2018, the federal estate tax exemption is $11.2 million. This is the amount that can be transferred before the estate tax and its 40 percent rate is applied to your estate. Prior to the enactment of the tax legislation, the federal estate tax exemption was $5.49 million. Clearly, this is a very significant difference, and changes like these should definitely be discussed with your estate planning attorney if you are a high net worth individual.
As you can see, there are many things to take into consideration as the years pass, and you should certainly go forward in a fully informed manner. With this in mind, we have scheduled a number of informative Webinars over the coming weeks. You can obtain some very useful knowledge if you attend the session that fits into your schedule, and these Webinars are being offered free of charge. To register, visit our Webinar schedule page, find the date that works for you, and follow the simple instructions.