Estate Planning in 2013 — Is It Time To Make Changes?

Congress acted (not just at the last minute, but after the last minute). The update to the estate tax provisions is permanent, or at least what passes for permanent in the world of taxes and politics. So does that mean you need to make changes to your estate plan?

In a word, yes. Mind you, that answer does not apply to everyone — but it does apply to most middle-class married couples and wealthy individuals and couples.

For a decade now we’ve been telling clients that they will need to revisit their estate plans once the scheduled changes in the tax law were resolved. They are now resolved. Of course Congress could act again, and make further changes — but that seems unlikely, and probably would only happen after a lot of discussion. In other words, you should treat the current federal estate tax law as likely to outlast the life expectancy of your estate plan.

What needs changing, and how do you know if you are a candidate for change? Of course we can only answer that after a consultation, and for that you need to make an appointment and bring us detailed (and, for existing clients, updated) information. But here is a preview of what you are likely to talk with us about:

Do you have an existing A/B (or marital/bypass, or survivor’s/decedent’s) trust split in your plan? You probably do if you are married, if you are worth anything close to $1 million (or more), and if you had your estate plan prepared in the past quarter-century or so. Do you still need that trust split? Likely not. Does it hurt anything to have it in your plan? Maybe — it might make your estate plan unnecessarily complicated, but it might actually have negative income tax consequences.

Does your existing trust have “disclaimer trust” provisions? If so, you might consider revising to take them out. They probably don’t hurt anything, other than to make your estate plan that much more complicated, and to distract you from your real concerns — taking care of your family, supporting your favorite charitable cause(s), or whatever is truly important to you and your estate plan.

Are you a surviving spouse, living with an already-funded bypass/credit shelter/decedent’s trust? You might be able to make changes. State laws vary, and circumstances vary even more — but at least in Arizona there might be some opportunity to simplify  your life, reduce administrative costs (like annual tax returns) and even save your heirs a few dollars in income tax liability.

Has it been more than five years since you last visited a lawyer? If so, it’s time to update your estate plan anyway — just think for a moment about where you were five years ago, what you didn’t yet know about your family, your finances or whatever has changed. Even with no congressional action it would have been time to revisit your estate plan if it’s been that long.

Have your circumstances changed very much since your last estate planning visit? Have you gotten a new child or grandchild? (Mazel tov!) Have you moved to a new state,  married or divorced, become significantly more wealthy (or less)? Bought a vacation home in another state? Become interested in a new charitable undertaking? If any of those things describe you, it’s time to talk to your estate planning lawyer.

Are you worth between about one million dollars and five million dollars (make that ten million for married couples)? Then you are in the group of people who most need to check in with your estate planning lawyer.

Is this just a thinly-disguised attempt to drum up business? No. We’re in total agreement if you have someone else doing your estate planning and you go back to them. We obviously can’t handle your estate planning if you don’t live in Arizona, and it’s difficult for you and us if you live outside of southern Arizona. We just want to encourage everyone to update their estate plans in light of the relative permanence in the federal estate tax rules.

What bad things happen if you make an appointment with your estate planning attorney? Well, you will probably have to write a check — but of course the cost of failing to plan is usually much higher than the cost of planning. You will also have to gather some information — but we are more interested in round numbers and rough conceptions about your assets than in picky details about which stock investments have done well or precise values of your family business. We strive to make your visit no more unpleasant than a routine dental checkup.

That reminds us. We need to call our dentist.

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