When you put your estate plan in place, you may breathe a sigh of relief with the understanding that you have finally put the responsibility behind you. This is understandable to some extent, but it is important to see a bigger picture.
Your original estate plan is going to reflect your life situation at the time it was created, but as they say, the only constant is change. You should look at estate planning as an ongoing process, because updates will probably be necessary.
Changes in Financial Status
Over the years, you may experience a great deal of financial success. Under these circumstances, your estate plan may need revisions in light of your improved position.
You may find that you are in a position to establish a trust that will remain in place for an extended period of time, and estate taxes can enter the picture.
Right now, the federal estate tax exclusion is $11.7 million. This is the amount that can be transferred before the tax would be levied on the remainder. In 2026, it is going down to $5.49 million, and there is a bill in Congress right now that would reduce it to $3.5 million.
There are 12 states that have state-level estate taxes, and the District of Columbia has its own estate tax. We do not have an estate tax here in Ohio, but if you own property in a state with an estate tax, it would apply to your estate.
Of course, the tax would not be a source of concern if its value does not exceed the exclusion in the state where the property is located. It should be noted that the state-level exclusions are lower than the federal exclusion.
There are state-level estate taxes in Massachusetts and Oregon, and the exclusions are just $1 million. These are the other states that have state-level estate taxes:
- New York
- Rhode Island
You should have a basic estate plan in place when you become a self-supporting adult. This will include life insurance to cover your final expenses, some type of asset transfer vehicle, and an incapacity component.
To account for possible incapacity, you should state your life support preferences in a living will. A durable power of attorney for health care should be added to empower someone to make medical decisions on your behalf that are not related to life-support.
If you get married, an estate plan revision will be necessary, and you can potentially take a joint approach. A living trust is a very versatile and effective estate planning tool, and a shared living trust can be the ideal choice for some couples.
One of the good things about a living trust is the fact that you will be prepared when and if children come along. You and your spouse would act as co-trustees while you are living, and you would name a successor to assume the role when both of you are gone.
This individual could administer the trust on behalf of a minor child if the unthinkable takes place. Along these lines, you should also name a guardian for your dependent children in a simple will.
Divorce and Remarriage
A change in marital status will trigger the need for an estate plan update. If you get remarried as a parent, you can take steps to protect the inheritances that you would like to leave to your children.
This can be done through the utilization of a qualified terminable interest property (QTIP) trust. If you establish the trust and you predecease your spouse, the trustee would distribute the trust’s earnings to your spouse for the rest of their life.
They could also use property that is technically owned by the trust. For example, if you convey your home into the trust, your surviving spouse could continue to live in the home as usual.
Your children would be the ultimate beneficiaries of the trust, and they would inherit the assets that are in the trust after your surviving spouse’s death.
Schedule a Consultation Today!
If your estate plan should be revised, we are here to help, and we can work with you to develop an initial plan if you are just getting started. You can schedule a consultation at our Cincinnati estate planning office if you call us at 513-721-1513.
There is also a contact form on this site you can use to send us a message, and if you reach out electronically, we will get back in touch with you promptly.