Colorado Probate Blog - Wade Ash Woods Hill & Farley, P.C.

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Is It Time to Update Your Estate Plan?

We recommend that our clients review their estate plan every few years to make sure that it remains current. Here is a list of “life events” and other things that should trigger a review of your estate plan.

Life Events
• You marry or your marriage is dissolved.
• You have remarried or plan to remarry.
• Birth of a child (or grandchild, if you want to include grandchildren as direct beneficiaries).
• Marriage of a child or other beneficiary if you are concerned about the maturity, responsibility, or ethics of the   new spouse.
• Divorce of a child or other beneficiary, or concerns about the stability of a beneficiary’s marriage.
• You have a pet and want to provide for the pet’s care after you die or if you lose capacity.
• A beneficiary of your estate plan has a creditor problem or simply is not good at managing money.
• A beneficiary under your estate plan is handicapped or is receiving or may receive needs-based government benefits, such as Medicaid or Supplemental Security Income (SSI).

Coordinate Asset Titles and Beneficiary Designations with Your Estate Plan Documents
• Assets titled in joint tenancy pass automatically to the surviving joint tenant rather than under a deceased owner’s will or revocable trust.
• Other assets, such as life insurance, retirement plan benefits, and individual retirements accounts (IRAs), may pass under a beneficiary designation rather that under the owner’s will or revocable trust.
• You should periodically review your beneficiary designations and how your assets are titled to make sure that your estate plan as a whole is coordinated and will achieve what you want.

Recent and Potential Future Tax Law Changes
• The amount that is exempt from the federal estate tax has increased significantly (to $5.95 million for 2017). If you have an estate plan that was prepared when you thought your estate would be subject to estate tax, and now it appears that your estate will not be subject to estate tax, then your current documents may have adverse tax consequences or may simply be more complicated than necessary.
• Conversely, if your estate plan was prepared when you thought that you would not be subject to the estate tax, but your estate has increased to the extent that it will or might be subject to tax, you should consider updating the plan so as to minimize the tax.
• Income tax rates have increased and the 3.8% tax on net investment income puts a trust into an income tax bracket of 43.4% as soon as it has taxable income of more than $12,500 for 2017. Estate plan documents should be reviewed and possibly revised to allow for income to be taxed to beneficiaries in lower brackets rather than to the trust.
• The new administration in Washington has plans to repeal the “death tax.” (“Death tax” refers to the federal estate tax. It is not yet clear whether the proposal will include repeal of the gift tax and the generation-skipping transfer tax.) Although the Republicans now have the White House and majorities in both houses of Congress, outright repeal of the estate tax may not be simple. Under the “Byrd rule” in the Senate, repeal would require 60 votes (the Republicans control 52 votes), unless repeal is passed as part of the budget reconciliation process, in which case legislation passed with a majority of less than 60 votes may not expand the federal deficit beyond the 10-year budgeting window, which means the estate tax might be repealed but automatically come back after 10 years. It is too early to tell what will happen, but the possibility of repeal (and possible reinstatement) makes it essential to build flexibility into an estate plan.

Passage of Time
• You might want to re-sign a financial or healthcare power of attorney that is more than five years old. (Although they ought not to, some institutions refuse to accept older powers.)
• If it has been more than three years since you reviewed your estate plan documents as to who will receive your property, when they will receive it, and who will act for you (as agent, trustee, or executor) it’s a good idea to review the documents to see if changes are needed. For example:
  ▸ Consider whether you want to add or remove gifts to individuals or charities.
  ▸ Consider whether you want to change the amount or percentage share that an individual or charity will receive.
  ▸ If your current plan disposes of an asset that you no longer own, you should revise the plan to eliminate that     gift (to avoid confusion) or to provide a substitute gift.

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