When Was the Last Time You Reviewed Your Estate Plan?
In our last post, we looked at the fact that the vast majority of American adults do not have estate plans in place. Since people drag their feet, once they do take action, they feel as though the burden has been lifted. They believe they have taken care of their responsibility, and it is a done deal.
This is a risky way to approach the matter. Estate planning should be viewed as an ongoing process. You should go into it with the knowledge that you will probably have to make adjustments.
Significant Life Events
Some of the circumstances that will trigger the need for estate plan updates are obvious. Marriage, divorce, remarriage, and additions and subtractions to the family would fit this description.
When you work with our firm to develop your estate plan, we gain an understanding of your situation at that time. As a result, when you come in to make adjustments, we will be well-positioned to revise your existing plan.
Under the Radar Circumstances
There are other changes that can make your existing plan obsolete that are not quite as obvious. The person that you originally designated as an executor or trustee may pass away, or they may not be capable of assuming the role. Under those circumstances, you have to designate someone else.
This dynamic applies to beneficiaries named in a will or trust and beneficiaries of life insurance policies, IRAs, etc. A complicated situation can arise if a named beneficiary passes away before you.
Estate Tax Exposure
We have a federal estate tax in the United States that can have a significant impact on your legacy because it carries a 40 percent maximum rate. The exclusion is the amount that can be transferred tax-free. The rest of your estate would be taxable.
In 2022, the exclusion is $12.06 million, but it is going down to $5.49 million indexed for inflation in 2026. That is a radical change. If you planned your estate with the understanding that taxation would not impact you, the reduction could be a big deal.
There are steps that can be taken to reduce estate tax exposure. One such step would be to revise your estate plan with estate tax efficiency in mind. In addition to the legislative changes to the exclusion, individual financial success over the years can create the need for an estate tax strategy.
Nursing Home Asset Protection
When you first establish your estate plan, you may not think about nursing home asset protection. As the years pass and you find it harder to take care of your daily needs, it may become a priority.
This is an issue because Medicare does not pay for nursing home costs. In addition, it does not cover in-home care. Long-term care is extremely expensive, and depending on your resources, it could consume all or most of the assets you want to leave to your loved ones.
Medicaid will pay for long-term care if you can gain eligibility. Even though it is a need-based program and there is a low asset limit, there are steps you can take to become eligible. This is an area of specialization for us, so we can adjust your estate plan with long-term care in mind.
Access Our Estate Planning Worksheet!
We have developed a worksheet that you can go through to gain a better understanding of the estate planning process. It is being offered free of charge, so you should definitely take advantage of this resource. To get your copy, click this link and follow the instructions.
Need Help Now?
If you are ready to engage an Oklahoma City estate planning lawyer to put a plan in place or revise your existing plan, we are here for you. You can send us a message to request a consultation appointment, and we can be reached by phone at 405-843-6100.
After helping his own family deal with a lengthy probate and the IRS following his father’s untimely death in a farm accident, Larry Parman made a decision to help families create effective estate plans designed to reduce taxes, minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors.
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