|February 14, 2014|
Previously published on February 7, 2014
This is the time of year when we are all trying to keep our New Year’s resolutions on track. We suggest an additional resolution that is easy to keep and very important for ourselves and our loved ones.
Review Estate Documents
We recommend reviewing your existing estate planning documents on a regular basis. Whether you have a will, a trust (or both), powers of attorney or health care directive you need to ask yourself:
- When was the last time I read these documents?
- Do these documents reflect my current goals?
- Have I allocated my assets to the right beneficiaries and under the appropriate terms? Have circumstances changed?
- Are those that I have “left in charge” of my affairs appropriate in light of current circumstances?
If you haven’t reviewed these documents in a few years, early in the first quarter of each year is a good time to revisit them.
Estate planning documents allow us to control when, and in what form, our children or other beneficiaries will receive their inheritance, and who is in charge of that inheritance.
- Are there beneficiaries with special needs, or other reasons to plan for the management of the inheritance for the recipient’s lifetime?
- Are there charitable endeavors that require your financial support?
- Are there potential needs for some asset protection?
- Have you given thought to how family heirlooms and jewelry can be passed fairly and without hard feelings?
When conducting your annual review, be sure to include beneficiary designations. Remember that any assets passing by beneficiary designation generally do not pass under your will.
- Do my current designations for my retirement funds (IRAs, 401(k), or 403(b) account balances) or life insurance proceeds reflect my current goals?
- Are my beneficiary designations coordinated with the terms of my other estate planning documents?
- Have I designated primary and contingent beneficiaries?
Don’t rely on what your memory tells you. Rather, review the actual designation form and, if you don’t have a copy, ask the custodian or trustee of the retirement fund or your life insurance advisor to send you the current one.
As you may know, there have been significant changes in the federal estate and gift tax arenas in the last year or so. Current law allows an individual to transfer up to $5 million of wealth (adjusted annually for cost of living) during the course of his or her lifetime, or at death, before any federal estate or gift taxes must be paid. The combined exemption for lifetime and death transfers for federal purposes in 2014 is $5.34 million. As a result, many of us may not need to incorporate tax planning into estate planning documents. While that may be the case for federal tax purposes, both Maryland and the District of Columbia assess an estate tax if the decedent’s estate exceeds $1 million. Virginia currently has no estate tax. Therefore, those living in Maryland and the District of Columbia should include tax planning in the annual review process. Note that the Maryland legislature is currently considering a bill which, if enacted, would phase in a Maryland estate tax exemption equal to the federal estate tax exemption.
If you have not implemented an estate plan, or if you have one but have tucked it away and haven’t looked at it in several years, let this be a reminder that your estate plan is not immutable. You should review it on a regular basis to ensure it reflects your current personal or financial situation. We encourage you to include this as one of your New Year’s Resolutions.