From 1987 through 2003, the federal estate tax exemption amount was between $600,000 and $1,000,000. This prompted many people to create Irrevocable Trusts to hold life insurance, or other Irrevocable Trusts to hold appreciating assets. The purpose was to remove life insurance proceeds or to remove the appreciation of an asset (think Amazon or Alphabet stock) from one’s taxable estate.
Deciding what to do with your assets after you pass away can involve a series of difficult decisions. These decisions are made even more difficult when one of your loved ones struggles with addiction or mental health issues.
A number of surveys over the last few years report that between 55% and 70% of adults in the United States don’t have an estate plan or have a plan that is outdated. The reasons given for their failure to plan and/or update their estate planning documents are myriad, and include, 1) I don’t have the time, 2) my estate isn’t large enough to worry about, 3) planning is too expensive, 4) I don’t like to think about my death and, my favorite, 5) there’s no estate tax so I don’t need an estate plan. Brilliant.
Upon completing their estate planning, clients often ask how often they will need to update their Wills and other estate planning documents in the future. While there is no set amount of time that applies to every client’s personal situation, a good rule of thumb is to review one’s Will at least every two to three years to ensure the Will still reflects one’s wishes.
I was always amazed how my grandfather could build anything. There was no home project that was too big or too complicated for him. Unfortunately, that gene skipped my generation, and when I get involved in do-it-yourself projects around the house, I generally make more work and more expense to fix my work by a professional. In a recent Virginia case, Irving v. Divito, the decedent’s attempts to modify his estate plan had the same result as my attempts to fix plumbing.
It is always important to make sure the beneficiary designation for Life Insurance, Annuities and Retirement Accounts are current, especially after a significant event, such as, disability, divorce or birth. It is even more important to make sure the beneficiary designations are current for Federally sponsored assets, such as Federal Employees Group Life Insurance.
Estate planning is more than just tax planning. It is the “peace of mind” planning that protects you, your family and your assets during your life and after.
This guide was prepared for those who wish to learn some of the basic concepts and terminology used by practitioners of estate planning. Without making you an expert, this basic knowledge will enable you to participate in discussions with your advisors as an informed consumer.
If you're young, healthy and busy building up your assets, an estate plan to distribute those assets might be the furthest thing from your mind. If you're older, you might postpone estate planning simply because death is an unpleasant subject.
Much has been written about the advantages and disadvantages of Revocable Living Trusts over Wills. The purpose of this article is to provide some general guidelines as to when a Trust may (or may not) be a preferred estate planning document over a Will. This article offers general information meant to supplement and not replace competent legal advice.