The majority of adults in the United States do not have estate plans in place, and this even applies to individuals that are 50 years of age and older. Strangely enough, researchers have found that most of the unprepared folks know that estate planning is important.
Since so many people procrastinate, many of them breathe a sigh of relief and forget about the matter entirely after they put an initial plan in place. In fact, this is a mistake, because time does not stand still.
Circumstances can arise that will call for estate plan updates, and we will look at some of them here.
There are laws in place that apply to matters that can have an impact on your estate plan and/or your plan for aging. Many elders rely on Medicaid to pay for long-term care, because Medicare does not cover the custodial care that nursing homes provide.
Since this is a need-based program, there are income and asset limits, and there are allowances for the spouses of nursing home residents that can live independently.
The federal estate tax can be applied on the portion of an estate that exceeds the credit or exclusion. In 2021, it will be $11.7 million. This is a record high, but it is subject to change.
In fact, it is going to go down to $5 million (adjusted for inflation) in 2025 if there are no changes in the meantime. Plus, it could be reduced below $5 million via legislative mandate. To provide some context, the exclusion was just $2 million in 2008, and it was $675,000 in 2001.
There are factions within the government that want to increase taxes on the wealthiest Americans, and a significant reduction in the exclusion would be one way to do it.
As the laws stand right now, you get a step-up if you inherit assets that appreciated during the life of the person that left you the inheritance. This means that you would not be required to pay capital gains taxes on the appreciation that took place during the life of the decedent.
Some lawmakers have proposed an elimination of the step-up in basis, because it is used by high net worth individuals to avoid capital gains taxes.
If the law changes after you have already established your estate plan, a revision may be necessary to reflect the current state of affairs. As a layperson, you have no reason to keep a finger on the pulse of these matters.
With this in mind, you should review your plan with an estate planning attorney every few years to determine if any revisions are necessary.
Circumstances in your own life can trigger the need for estate plan updates. Some of them are very obvious, like changes in marital status, but others can fly under the radar a bit.
This is especially true if you put your estate plan in place many years ago. Do you remember the beneficiary designations for all of your accounts and the percentages that each beneficiary will receive? Are your power of attorney agents, your trustee, and/or your executor still capable of performing the tasks?
Your financial status is quite relevant as well. If you are very successful, you may be exposed to the estate tax with an old estate plan that did not address the matter of estate tax efficiency.
These are a handful of things to think about, but there are others. When you resolve to review your plan on an ongoing basis, you can always be sure that it reflects your current situation.
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If you are ready to review your existing estate plan, we would be more than glad to provide the assistance they need. And of course, if you haven’t executed your initial plan, we can gain an understanding of the situation and help you develop a custom crafted approach.
You can set the wheels in motion right now if you give us a call at 513-721-1513, and you can fill out our contact form if you would prefer to send us a message.