Updating Your Estate Plan Is Essential Every Three to Five Years… Except in Times of Pandemic!
By Mike Hoffman, Esq., CPA
Estate Planning is a process that should by reviewed and updated continually. Due to changing circumstances and laws, we suggest that clients review their plans every three to five years. However, in times of global pandemic and when everyone is concerned about their health, we suggest that clients make it a priority to ensure all of their documents are in order and their wishes are clearly made known to loved ones.
Sometimes the review of estate planning documents can take the form of a simple phone call to confirm that nothing is technically required to keep the client’s intent and wishes reflected in the documents. Other times, due to a change in family circumstances, new tax or local laws, a more comprehensive review is warranted. Good news is this more in-depth review can now be handled virtually in keeping with the many stay-at-home and social distancing mandates in place around the country.
Here at Hoffman & Associates we don’t do simple wills! Our clients want to achieve certain levels of control, estate tax efficiency, income tax flexibility, asset protection from divorce and creditors, asset preservation in the family, and probate savings. To accomplish these objectives assets are left to loved ones in trusts, whether for surviving spouse or descendants.
Core documents (wills, general powers of attorney and health care directives), life insurance trusts, and other entities such as family trusts, family limited partnerships and a myriad of other trusts formed for estate planning purposes, need to be kept up to date. In the last ten years alone the federal estate tax laws have changed significantly, and there is no reason to believe that the trend will change. President Trump recently doubled the exemption and it currently sits at $11,580,000, but we have listened and observed a Presidential primary season where almost all the candidates professed the promise to lower the exemption back to $3,500,000 or even $1,000,000. Trump’s tax law change is scheduled to sunset at the end of 2025, even if there are no major changes politically. The current federal estate tax rate is 40%, which is up from 35%, but a long way from the 70% that has been proposed by most of the candidates that were running for President (the maximum estate tax rate was 70% when I started practicing in 1976).
Georgia has a new Trust Code and new Probate Code, so there are language changes required in documents to keep probate and trusts running efficiently and effectively. Georgia also has extended the maximum period for trusts from 90 to 360 years and recently adopted a decanting statute and more liberal modification rules to allow us more certainty when updating irrevocable trusts used for estate planning. And finally, Georgia has adopted statutory general powers of attorney and health care directives, and these forms need to be kept current and the choice of designated agents reviewed.
There is more of a focus on drafting for flexibility, using powers of appointment, trust protectors, change of situs and merger/bifurcation provisions than was prevalent ten or twenty years ago. We focus on income tax matters more in our estate planning, putting provisions in our documents that allow appreciated assets a better chance of going from generation to generation with new stepped up tax basis.
While most of our clients are happy creating beneficiary controlled trusts, choice of executors and trustees always have to be reviewed. Kids may be too young, or Dad or Mom too old to do it themselves!
Annual gifting to take advantage of the annual gift tax exemptions ($15,000 per child) is still a core objective. Gifting to use the increased exemption for estate tax savings and asset protection, before the exemption goes away, is still appropriate. We have dozens of tools to make sure that gifting strategies are efficient and effective under the circumstances.
Life insurance is still critical, whether for family security, liquidity, buy/sell or gift equalization purposes. Succession planning is hugely important; how to we protect the goose that is laying the golden eggs! Life insurance and retirement accounts are generally considered non-probate assets, that is, they are not controlled by the will, but rather by beneficiary designation. Those have to be reviewed and updated where appropriate.
Probate itself needs to be looked at, particularly if you own property outside the State of Georgia or there is an abundance of concern about a challenge to your will by certain family or need for secrecy from your neighbors, etc.
Philanthropy plays an ever increasing role in many of our lives as we get older, and there are so many ways to accomplish objectives like control, income tax savings, flexibility and creating a family legacy.
So whether it is updating an old will to change executors and trustees, making sure the old life insurance trusts have been properly funded with the insurance policies, updating the gifting strategies with old family trusts, or modernizing all the old documents, the estate plan should be dusted off every once in a while but especially during a time of uncertainty. It may be time to add to the core planning that you started years ago to accomplish new goals and objectives that have evolved. It may be time to think about the appropriate communication and involvement of other family members, and where we can, at least think about anything older generations could do to make the stewardship and flow of their assets more effective.
For more information regarding this information or any estate planning concern, please contact us at 404-255-7400 or info@hoffmanestatelaw.com.
