Over the last two calendar years, much of the discussion pertaining to estate planning has revolved around possible changes to the tax laws. While changes to tax laws certainly can and should prompt a review with your advisor, it’s much more common for major life events to cause changes that trigger the need to revisit your estate plan.
Here are several such scenarios that might affect you:
8 Common Estate Plan Triggers
1| Death. The death of a potential beneficiary, named trustee or guardian can derail an existing estate plan. Accordingly, your plan should be reviewed in light of the person’s death in order to confirm you are comfortable with what will happen now that the person is no longer alive.
2| Disability. If someone named in your estate plan to perform a certain job — such as your executor, a trustee or guardian — should become disabled, then you will need to confirm that your named successors are still acceptable to you. If not, you will want to appoint someone else to fill these vital roles. Additionally, if a beneficiary or potential beneficiary should become disabled, then you need to consider whether you may need to set up a special needs trust to avoid jeopardizing any governmental benefits that the beneficiary receives or will receive in the future due to his disability.
3| Marriage. The laws in all states guarantee a minimum inheritance among spouses, irrespective of the terms of testamentary documents (unless the parties have a valid prenuptial agreement). Thus, a marriage, whether yours or a beneficiary’s, should prompt a review of your current estate plan to ensure it accomplishes your desires in light of the new marriage.
4| Births or Adoptions. When your family grows larger because of birth or adoption, it should prompt a review to ensure that your plan considers the possible future needs of the child. As time goes by and this new addition becomes a beloved family member, you’ll be glad that you did.
5| Change in Wealth. A plan should be reviewed when you experience a significant change in your net worth, either to the upside or the downside. If you have an increase in your net worth, it may be that your plan does not contain the necessary provisions to handle tax or other transfer issues typical in larger estates. Conversely, if you have a decrease in your net worth, you may find that your current estate plan is more complex than it needs to be for a more modest estate.
6| A Move to a Different State. While many components of estate planning are driven by federal laws that apply to all citizens, each state still has its own unique laws that also influence how an estate plan is administered in its state. Thus, if you move to a state different from the one in which you resided when you put your existing plan into place, you should consult with a local attorney to ensure that your current estate planning documents will be recognized in the new state, or whether changes need to be made due to the change in jurisdiction.
7| Creditor Issues. A current reality is that many people today have a great deal of debt which may lead to future issues with creditors if they are unable to pay them. If you discover that a beneficiary may have creditor issues, you may need to incorporate a particular type of trust into your estate plan that will hold his or her inheritance. While the beneficiary will have some limitations on access to the money in the trust, the benefit is that the assets in the trust will never be subject to the claims of creditors.
8| Observation of Bad Habits Among Potential Beneficiaries. Another reality is that many people struggle with addictive habits that inhibit them from being capable of managing an inheritance of any size. As in the case of a beneficiary with creditor issues, you can utilize a specially designed trust to hold the person’s inheritance. Managed by a trustee, the trust could give the person limited access to the funds without fear of the assets being used to further fuel addictive behavior. Thus, if you learn a beneficiary may be dealing with such issues, your plan may need to be revised to incorporate a trust.
We still want to keep an eye on Congress and any changes it may make to the tax laws in order to know if our estate plans need to be reviewed. However, it is also important to be aware that any of the events or discoveries outlined above may also require a conversation with your attorney or other trusted advisor about what changes, if any, may be needed in light of the new facts.
If you’re wondering how an event in your life might affect your estate plan, call us at AmeriTrust at 877.887.8899. We’re glad to help.
Chris Kelly, JD is Nashville’s market president at Argent Financial Group, the parent company of AmeriTrust. Argent is a leading, independent, fiduciary wealth management with offices across 12 Southern states.