Category: Updating Your Estate Plan

It’s the start of a new year, which means tax season—and this year’s April 17th IRS filing deadline—is just around the corner. Soon you’ll be receiving tax forms such as your W-2 or 1099s, and you’ll start thinking about the life events that could affect your taxes in various ways.

This flurry of tax prep activity is the perfect opportunity to get your estate plan in order, too, and kill two birds with the proverbial stone.

Why? Because as you run down your list of “tax prep” questions, you will find that your answers could also impact your estate plan.

Some things to think about:
● Did you get married or divorced? Did any of your children or grandchildren?
● Did you welcome a child or grandchild into your family by birth or adoption?
● Have any of your children or grandchildren reached the age of majority?
● Have you dealt with illness or hospitalization? Have you incurred medical expenses?
● Did you buy or sell a new property or any other major assets, like a vacation home?
● Did you move to another state?
● Did you buy, sell, open, or close a business?
● Have you made any charitable donations?
● Do you have any new life insurance or pension plans?

After you’ve answered these questions, get to work on gathering the corresponding paperwork. That might include deeds, policies, and contracts as well as bills and receipts. Having all of this information on hand can help you prepare your tax forms and whip your estate plan into shape.

Here’s how your tax-related changes can affect your estate planning.

If you already have an estate plan, your number one goal is to make sure everything still represents your wishes, taking into account the past year’s events. Maybe because of a change in circumstances, you need new or updated estate planning documents. Perhaps it’s time for an LLC and an update to your living trust now that you have a small business, or maybe you need to update beneficiaries because of births or deaths. Or, if you’ve had a change of heart about who should inherit from you, you also need to update your plan.

If you don’t have an estate plan, having this information at your fingertips sets you up for a productive conversation with your estate planning attorney. After reviewing your legacy goals, your lawyer can draw up key documents, such as:
• A will. Among other things, this document can ensure that your wishes—and not the laws of the state—determine how to distribute your estate.
• A revocable living trust. In addition to, or as an alternative to a will, you can establish a living trust, which allows your estate to bypass the potentially long and costly probate process upon your death, gives you extra privacy, and helps to avoid the potentially costly guardianship or conservatorship court process (sometimes called “living probate”) if you become incapacitated.
• A living will. This document expresses your desires regarding life-sustaining medical treatment, if you become incapable of communicating your wishes.
• A durable power of attorney. This appoints someone to step in and take over your financial affairs if you are unable to do so, reducing the possibility of hard feelings among loved ones or the need for court intervention.

It’s a new year, and new possibilities are in the air. As long as you’re getting started on your taxes, take a few extra moments to get the ball rolling on your estate planning as well. By getting organized in this way, you’ll be well on your way to making 2018 an amazing year.

As Anne Burrell once observed, “Organizing ahead of time makes the work more enjoyable. Chefs cut up the onions and have the ingredients lined up ahead of time and have them ready to go. When everything is organized you can clean as you go and it makes everything so much easier and fun.”

Are you ready to develop a comprehensive estate plan designed to achieve your goals and protect your family? Call our offices today to get started.

Why Your Estate Planning Project Must Morph into a Process

Many people put their estate plan on their to-do list as a one-time project: “Create estate plan” or “Meeting with lawyer 10:30 a.m. Thursday for estate plan.”

Thinking of your estate plan as a single project or task to complete and move off your list is a common approach – but it’s also an approach that can land you in considerable hot water. Here’s why it’s essential to view your estate plan as a process, rather than a project.

Process vs. Project: What’s the Difference?

A project that takes several steps to complete – like an estate plan – can seem like it’s a “process” already. First, I need to call the lawyer. Then, I need to make time to attend the appointment. Before that, I need to get together these documents….

In fact, a project doesn’t become a process simply because it takes time and effort to complete. Here are some of the key differences between a project and a process.

A Project:

● Seeks to create something new or implement a single, concrete change.
● Requires leadership to plan and execute.
● Can have its plans or goals changed on short notice.

A Process:

● Creates value by returning to the same task many times.
● Requires management to ensure the process is consistent and produces expected results.
● Can be changed only by launching a project with a goal to change the process.

Estate Planning as Process

When you’re creating a new estate plan, it’s natural to see that plan as a project. You’re creating something new when you work with a team to implement your plan. You create a positive change in your life by having an estate plan from not having one. And, you’re right. Setting up a trust or implementing your first estate plan certainly qualifies as a project.

But, the goal of the estate plan “project,” however, should transition into an estate planning process by which you check, evaluate, and update your will, trust, and other legal documents regularly – perhaps once a year, but certainly every time you hit a major life milestone, like the birth of child or grandchild, death of family member, divorce, marriage, significant change in assets or income, and the like. When your estate planning is viewed as a lifelong process, your plan is much more likely to serve your family’s needs, whatever they may be, when the time comes simply because you’ve been managing it proactively with each change in your circumstances.

We can help you get started with estate planning and are here to guide you along the entire process. Let us become your ally in managing the process and in ensuring that you and your family gain maximum value from returning to it on a proper schedule.

You finally crossed “getting your estate plan done” off your list, and you’ve (rightly) breathed a huge sigh of relief. By tackling this challenge, you’ve not only established protections for your loved ones and legacy, but you’ve also freed up some important “mental space” that had previously been preoccupied.

Once you create the documents that make up your estate plan, your estate planning attorney will likely prepare a binder containing all pertinent documentation. This estate planning binder is critical because it provides key information regarding your intentions after you pass away or if you become incapacitated. Once your trust is fully funded, your binder should also contain information about your assets. This makes administration easier for your family. This binder should be stored safely, reviewed regularly, and updated when necessary in order to avoid confusion when your loved ones need to refer to it.

Before we get into the nuts and bolts about how to complete this review process – to help you stay in control now that you’re there – let’s first take a step back and clarify a point that confuses many clients. Your estate plans and your financial plans for the future are two completely different things. They are both obviously important, and they both should be kept in a safe place and reviewed often. However, the estate planning binder has special importance because it contains your wishes and instructions for what should happen if you become incapacitated and when you die… as well as who should be in charge of what at those times. But this binder is not the same thing as your financial plan. Your financial plan is a comprehensive plan of the assets you have now (and the assets you may need in the future) to help you achieve your goals in life.

Where to Keep Your Estate Planning Binder

Your estate planning binder should be kept in a safe place along with your other important financial information. We recommend keeping it secured in a safe deposit box at your local bank or in a fireproof strong box, if you keep the documents at home. You can make photocopies or scans of the documentation for your own use if you wish to refer to them more frequently or have them as a backup. Remember though, the original documents have legal significance, so don’t create a situation where your family is forced to attempt to rely on copies – you need to safeguard your originals!

Who Should Have Access to the Binder

You obviously have discretion regarding who can access your personal financial information. However, strongly consider retaining direct access yourself until circumstances require someone else to step in to take control. If you keep the binder in a safe deposit box, for example, you could keep a spare key in your home or office and notify your attorney, next of kin, or successor trustee as to the key’s location in case they need to use it. Talk to your bank about what limited access rights to the safe deposit box might be available.

How Often to Review Or Update Your Binder

Your financial situation is likely to change over time – and perhaps more critically, other powerful and unexpected life events can shift your priorities and necessitate an adjustment to your plan.

For instance, the death of a spouse or life partner, a new marriage, an illness or accident that affects your child’s future, a sudden job loss or the surprising success of a business venture that you’ve plugged away at for years, or even a spiritual epiphany can reshuffle what’s important to you.

These events can also limit or constrain what’s possible for your future. Without renegotiating these commitments in a conscious way, you’ll likely feel intangible unease about them. The moral is that your binder should be reviewed periodically and updated to reflect the changes that happen in your life.

As a rule of thumb, we recommend reviewing your estate plan as follows:

● A quick review once a year

● A thorough review every 3 years to ensure the documents reflect your current finances and intentions

● Any time you experience a significant increase or decrease in income or wealth

● Any time you experience a major life change, such as a birth, marriage, or death in the family

● Any time you consider a change in who you want to benefit from your estate plan or who you have named as decision makers within your plan, such as a guardian, executor, or trustee

Keeping your estate planning binder secure and up to date will reduce confusion and likelihood of disputes when others need to enact your wishes for your estate.

Our firm has created our Client Care Membership Program for a select group of clients who desire this level of service. This Membership Program is a formal review and updating program that helps insure a client’s plan is updated due to changes in their circumstances, those of their family, and changes in the law.

As always, we are here to help. For peace of mind, give us a call to review or amend your current plan.

If your life or the law has changed since you signed your trust, it needs to be updated. Updates can be made by way of an amendment – or – a complete restatement. An amendment updates a specific part of the trust; whereas, a restatement, updates the entire trust. You might think that an amendment would cost less than a restatement, but that’s not necessarily true. Let’s chat about which is best for you.

Amendments vs. Restatements: Which Is Better?

Imagine a recipe card you’ve used for years. If one or two provisions have been crossed out and replaced, the card may still be readable. However, if many provisions have been altered, the recipe is likely confusing. If your loved ones can’t read your instructions and determine whether to add a cup of flour or or a cup of sugar, your recipe won’t work. You’ve got a 50/50 chance for a great dish – or a complete disaster.

The same can be said about revocable trust. Making one or two amendments is generally acceptable, but when revisions are numerous or comprehensive, your instructions may become confusing and you may be better served with a restatement.

Although amendments are generally used to make smaller changes and restatements are used for larger ones, there’s no bright line rule when it comes to amending or restating a revocable trust. A general guideline to follow is that anytime you’re making more than two changes, restatements are likely better as they:

● Foster ease of understanding and administration
● Tend to avoid ambiguity
● Reduce the amount of paperwork to retain and provide to financial institutions / parties
● Decrease the risk of misplacement
● Prevent beneficiaries from discovering prior terms
● Provide an opportunity to provide other relevant updates, such as changes in the law

In many cases, a restatement may actually be more cost effective than amendments. This is especially true today as computer software allows estate planning attorneys to create and retain documents easily and efficiently. Fortunately, today, you pay for legal counseling, not typing.

Have Questions About Updating Your Trust? We Can Provide Answers

Before deciding whether to amend or restate, it’s important to determine whether previous changes have inadvertently altered your intent or might adversely affect how the trust is administered. We’ll help make your instructions clear.

Have questions? If you do, that’s normal. We can provide you with answers. Whatever your circumstances, rest assured that we can help you to determine the best way to update your trust. Call us today and we’ll help make your instructions are up-to-date and crystal clear.

A resume is a “snapshot” of your experience, skill set, and education which provides prospective employers insight into who you are and how you will perform. Imagine not updating that resume for 5, 10, or even 15 years. Would it accurately reflect who you are? Would it do what you want it to do? Likely not. Estate plans are similar in that they need to be updated on a regular basis to reflect changes in your life so they can do what you want them to do.
Outdated estate plans – like outdated resumes – simply don’t work.

Take a Moment to Reflect

Think back for a moment – think of all the changes in your life. What’s changed since you signed your will, trust, and other estate planning documents? If something has changed that affects you, your trusted helpers, or your beneficiaries, your estate plan probably needs to reflect that change.

Here are examples of changes that are significant enough to warrant an estate plan review and, likely, updates:

● Birth
● Adoption
● Marriage
● Divorce or separation
● Death
● Addictions
● Incapacity/disability
● Health challenges
● Financial status changes – good or bad
● Tax law changes
● Move to a new state
● Family circumstances changes – good or bad
● Business circumstances changes – good or bad

Procrastination

Call our office now to get your estate planning review on the calendar. If you’re like most people, if it’s on the calendar, you’ll make it happen. Just as you update your resume on a regular basis and just like you meet with the doctor, dentist, CPA, or financial advisor on a regular basis, you need to meet with us on a regular basis as well. We’ll make sure your estate plan reflects your current needs and those of the people you love. Updating is the best way to make sure your estate plan will actually do what you want it to do.

Please allow us to be frank. It’s unrealistic to think that a piece of paper you draft, reflecting your life at a certain time, will work when your life has completely changed some years later. We’ll use the Kendrick family as an example.

Meet the Kendricks

Meet Bill and Karen Kendrick. They got their first estate plan in place when their daughter, Jessica was born 30 years ago. They updated it when their son Steve came along 4 years later. They attended one of our living trust seminars 10 years ago and got a fantastic trust-based plan in place, protecting themselves, their children, grandchildren, and dog, Sadie.

Unfortunately, the Kendrick’s didn’t join our client maintenance program; instead, they elected to take on the responsibility of calling for updates themselves. Life got busy and, as you might guess, that didn’t happen.

Here’s what’s changed in their lives in the last 10 years. Jessica and Steve are now adults and through college.

●Jessica has married and now had two daughters. One of the girls may have autism.

●Steve is also married and is expecting his first child.

●Karen’s mother is now living with them.

●They bought a vacation home in Florida.

Do you think their estate plan will still work the way they want it to?

Changes in Your Own Life

The Kendrick’s have experienced a lot of changes, but those changes might be typical of what 10 years brings. Think about the changes in your life over the past 10 years – or – since you last updated your estate plan.

Have you moved? Do you have more children or grandchildren? Have you started a business, suffered health problems, or purchased a new home? Do you have new accounts and investments? Do you now care for a parent, pets, or dependent children? Have you remarried, gotten divorced, or retired? Has someone you loved died? Have friends named in your plan as trusted helpers moved away or has your relationship changed? Are your children now adults and able to help you? Do you want to help with grandchildren’s college or dance lessons? Do you see the world in a different way?

Many things have happened in the past 10 years. Your estate plan needs to reflect the changes in your personal life, financial situation, and goals. There have also been changes in the law and we continuously learn to protect our clients in better and better ways, so the way we do things has changed.

Is Your Estate Plan Out-of-Date?

If you’ve experienced changes like the Kendricks or it’s been more than 3 to 5 years since you updated your estate plan, it’s time to come in. We’ll review your plan and chat with you about what’s been happening in your life, so we can get you and your estate plan up-to-date, reflecting where your life is now.

Estate plans are almost magical: they allow you to maintain control of your assets, yet protect you should you become incapacitated. They take care of your family and pets. And, if carefully crafted, they reduce fees, taxes, stress, and time delays. Estate plans can even keep your family and financial affairs private. But one thing estate plans can’t do is update themselves.

Estate plans are written to reflect your situation at a specific point in time. While they have some flexibility, the bottom line is that our lives continually change and unfold in ways we might not have ever anticipated. Your plan needs to reflect those changes. If not, if will be as stale as last week’s ham sandwich and can fail miserably.

If anything in the following 5 categories has occurred in your life since you signed your estate planning documents, call us now to schedule a meeting. We’ll get you in ASAP to make sure you and your family get protected.

1. Marriage, Divorce, Death. Marriage, remarriage, divorce, and death all require substantial changes to an estate plan. Think of all the roles a spouse plays in our lives. We’ll need to evaluate beneficiaries, trustees, successor trustees, executors/personal representatives, and agents under powers of attorney.

    

2. Change in Financial Status.A substantial change in financial status – positive or negative – generally requires an estate plan update. These changes can be the result of launching, winding down, or selling a business; business and professional success; filing bankruptcy; suffering medical crisis; retiring; receiving an inheritance; or, even winning the lottery.

    

3. Birth, Adoption, or Death of a Child / Grandchild. The birth or adoption of a child or grandchild may call for the creation of gifting trusts, 529 education plans, gifting plans, and UGMA / UTMA (Uniform Gifts to Minors Act / Uniform Transfers to Minors Act) accounts.We’ll also need to reevaluate beneficiaries, trustees, successor trustees, executors/personal representatives, and agents under powers of attorney.

    

4. Change in Circumstances. Circumstances change. It’s a fact of life – and when you’re the beneficiary or fiduciary of an estate plan, those changes may warrant revisions to the plan. Common examples include:

    

   • ●Children and grandchildren attain adulthood and are able to serve in trusted helper roles
   • ●Relationships change and different trusted helpers need to be named
   • ●Beneficiaries or trusted helpers develop overspending or drug / gambling habits
   • ●Guardians, executors, or trustees are no longer able (or no longer wish) to serve in their preassigned roles
   • ●Beneficiaries become disabled and need a special needs trust to receive government benefits
   • ●Guardians for minor children divorce, move to a new state, or are, otherwise, no longer appropriate to serve

      

5. Changes in Venue.Moving from one state to another always warrants estate plan review as state’s laws differ. Changes may be needed to ensure that you’re taking full advantage of – and not being penalized by – your new state’s laws. This is also true when purchasing a second home outside of your state.

Estate Plans Are Created to Help, Not Hurt, You

Old estate plans get stale just like old sandwiches do. You wouldn’t rely on last week’s ham sandwich for lunch; please don’t rely on your estate plan from yesteryear. If you’ve experienced any of the changes we’ve mentioned in this article, it’s time to come in and chat. We’ll review your estate plan and make sure you and your loved ones are protected.