Updating Your Estate Plan in the New Year Could Help You Avoid Costly Pitfalls

The only thing worse than not having an estate plan, is not keeping one up-to-date. Estate planning is probably the single most important thing you can do to make sure your wishes are honored after you pass away. Failing to regularly update your plan could prove to be very costly.

 

For starters, a central purpose to any estate plan is to provide instructions for how your property is to be distributed after your passing. Whether you choose a Last Will and Testament or a Revocable Trust to distribute your assets to loved ones is up to you, and, perhaps, your qualified estate planning attorney. Not keeping your Will or Trust updated could create confusion.

 

If you or someone named in your estate was married since your estate documents were last updated, then your plan should be revised to reflect those changes as soon as possible. The same holds for a divorce, death in the family, or birth of a new child or grandchild. If these life changes are not included at your passing, there is no guarantee that your wishes will be known or followed. This could result in unnecessary confrontation, probate delays and even litigation between your family members at a time of emotional grieving.

 

Another potential drawback is the loss of value in your estate. It is recommended that an estate plan should be evaluated at least every three years, not just to account for important life changes but also for tax reasons. Failing to keep up with changes in tax laws could influence the final value of your assets. Congress, for example, recently passed a massive tax reform package that, among other things, doubles the federal estate tax exemption. How that could affect you may best be determined in consultation with your estate planning advisor.

 

There are fifteen states that have their own estate taxes, and six other states with an inheritance tax, some even have both. The most common rates in these states range from 16 percent to 20 percent. Neglecting to stay on top of how these tax items might impact your estate plan could result in an estate worth a lot less to your loved ones. It is  also recommended to update your plan if the value of your estate has grown by 20 percent, because with asset growth comes growth in tax liability.

 

All of these considerations can be dealt with strategically, and legally, with the help of a qualified estate planning attorney. Consider contacting one for more information and get a jump start on the new year.

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