Now that everyone has settled into the New Year, it is a perfect time to review and update your estate plan. Because situations change–marriages are celebrated, children are born, deaths occur–taking the time to update previously drafted documents is critical.
DRAFT BASIC DOCUMENTS.
First, ensure at least the basic estate planning documents are in place. This includes a will, power of attorney, medical power of attorney, and an advanced healthcare directive (often called a living will).
For some, trust documents or life insurance policies may also be beneficial. Additionally, it is recommended that an inventory list be prepared. This list should include information about bank accounts, insurance policies, retirement accounts, property ownership and so forth. Taking the time to prepare these documents now can help avoid conflict and stress for loved ones left behind.
PREPARE A ‘DEATH FILE’
Once the basic estate planning documents are in place, it is important to ensure that they are all collected in one place and that at least one other responsible person is aware of this location. Ideal locations include a home safe, bank deposit box, or on file with an attorney. Ensure that the person(s) named power-of-attorney and executor know the location of these documents and are able to access them if needed.
REVIEW DOCUMENTS FOR ANY NECESSARY UPDATES.
Even after documents have been drafted and safely put away, it is critical to periodically review the documents to see if any changes are necessary.
For example, if a major life change has occurred since a will was drafted (marriage, divorce, birth of children), modifications to the estate planning document may be necessary. It is especially important to review the persons included as heirs, guardians, agents, or executors to ensure that they are still willing and able to serve, and that nothing has changed that could cause a change being needed to those designation.
Additionally, when reviewing a will or a trust, it is important to consider whether any property listed has been sold, transferred or purchased. If so, documents should be modified to reflect the changes in ownership.
REVIEW AND UPDATE BENEFICIARY DESIGNATIONS.
Remember that not all property passes under the estate by way of a will. There are certain assets that pass via contract.
For example, when a 401(K) is opened, the person appoints a beneficiary of the account. Regardless of what a will might say, the beneficiary designation will govern the distribution of the asset.
This also commonly occurs with life insurance policies, pensions, transfer on death accounts, and accounts held as joint tenants with right of survivorship. It is a good idea to keep a list of accounts and policies for which beneficiaries have been designated and review them to determine if updates are needed.
DETERMINE POTENTIAL ESTATE TAX LIABILITY.
Currently, the federal estate tax exemption for 2016 is $5.45 million per person and $10.9 million per couple. In order to determine if tax liability is something that could potentially be an issue, the estimated fair market value of assets should be calculated.
If an estate may be close to the exemption limit, the owner should meet with an attorney and accountant to determine various options to avoid the federal estate tax, which is set at 40% on any amount over the $5.45 million exemption.
Although no one enjoys thinking about death, having an estate plan in place can help ensure that the decedent’s wishes are carried out and can help to avoid conflicts among survivors. Even after the work of planning is done, however, periodic review for necessary updates or modifications is an important step to consider.
This article is not a substitute for the advice of a licensed attorney in your jurisdiction.
Tiffany Dowell Lashmet is an ag law specialist with Texas A&M Agrilife Extension. Contact her via e-mail: firstname.lastname@example.org Valuable estate planning tools are also available at http://www.farmjournallegacyproject.com/