Most people know that estate planning is important, but in spite of this, the vast majority of American adults do not have estate plans in place. Since there is so much procrastination, when they finally do take action, they put the documents away and consider it a closed matter.
In reality, estate planning should be viewed as an ongoing process. The estate plan that you initially establish will be based on circumstances that exist at that moment. Things invariably change over the years, and estate plan updates will inevitably become necessary.
Let’s look at some of the events can trigger the need for an estate plan update.
Your family situation is always evolving in multiple different ways. Most families grow larger over the years, and children pass through different phases. You may lose some of your older relatives along the way, and changes in marital status are not uncommon.
All of these different scenarios can necessitate the need for an estate plan adjustment. If you put the matter on the back burner when you know changes are necessary, you are taking an unnecessary risk, and the stakes are high.
You react to existing laws when you plan your estate, but they are always subject to change. For example, the estate tax exclusion is the amount that you can transfer before the tax would be levied on the remainder. It has changed dramatically over the last 20 years.
To give you an idea, the exclusion was $675,000 in 2001, and it is going to be $11.7 million in 2021. This is not just a matter of cost-of-living increases; some lawmakers believe in low taxes on the wealthy, and others take the opposite approach.
It can change just as dramatically in the other direction, so you have to be aware of the shifting tides. There are steps that you can take to mitigate the damage if you are suddenly exposed to this tax.
Another possible scenario is the elimination of the step-up in basis. As it stands right now, an inheritor is not required to pay capital gains tax on inherited assets that appreciated during the life of the decedent.
As you might imagine, many estate plans take maximum advantage of the step-up in basis. When he was a candidate, President-elect Joe Biden proposed elimination of the step-up basis, so this is another evolving situation that can impact your existing plan.
These are a couple of the possibilities, but there are other legislative actions that could fit into this category.
Your own personal financial success can certainly enter this picture. Your fortunes could improve to the point where your estate is in taxable territory. Short of this, if you are in a much better financial position than you were back in the day, a different planning approach may be needed.
Periodic General Review
Even if you have no particular reason to think that your estate plan should be adjusted, you may not fully remember every detail if you have not looked at the plan in years. You would do well to review your estate plan every few years to make sure that it reflects your current mindset.
Take Action Today!
If you have not revisited your estate plan in a while, a new year is upon us, and this is a great time to take action. We can gain an understanding of your current situation, examine your existing plan, and help you make the appropriate updates so you can go forward with peace of mind.
You can set the wheels in motion if you give us a call at 843-815-8580, and you can fill out our contact form if you would prefer to send us a message.