By Isabella Erickson
Estate planning is not a one-and-done deal. Throughout your life, you should regularly revisit your estate plan to ensure that it includes a plan for your assets and your beneficiaries. Maybe you have purchased a new home, or a new grandchild has just been brought into the world. When something changes in your life, you should revisit your estate plan. While an old will is better than no will, a current will is best.
If you have not updated your estate plan in the last five years, recent changes to federal law may have made your estate plan outdated. These changes may have made old plans obsolete, or they may have changed how your estate will be divided upon death. For example, the 2022 federal estate tax exemption is $12.06 million. In 2001, the exemption was $675,000. If your will was written in 2001 and stated that the tax-exempt amount would be given to your children and the remainder to your spouse, then the current tax-exemption may effectively disinherit your spouse if your estate is not over $12.06 million. Estate planning strategies that made sense in 2001 do not always translate well to 2022.
Maybe your estate plan includes an IRA that will pass to your children. Under the SECURE Act of 2020, non-spousal beneficiaries must withdraw all money from the account within ten years. Previously, non-spousal beneficiaries could take minimum distributions from an IRA over their lifetime. If your will was drafted before 2020, you may have a provision that requires your beneficiaries to only take the minimum distribution. This would have protected your beneficiaries from spending all of the money at once. However, a provision like that would now result in your beneficiaries having to wait ten years to take the entire sum of your IRA out. This might lead to a heavy tax burden on your heirs.
These changes to federal estate law should motivate you to reassess your wills and trusts. However, wills and trusts do not encompass all of estate planning. You should also have a financial power of attorney to take care of your finances if you become unable to do so. If you already have one, you should reassess their powers. When the federal estate tax exemption was lower, it made sense to give your financial power of attorney gift-giving powers. Gift giving is not subject to the estate tax. However, now that the estate tax exemption is so high, it is not ideal for your financial power of attorney to have so much power in gift giving.
Get into the habit of visiting with your attorney to reassess your estate plan every few years, or when there are major changes in your life. New laws may make old plans not ideal.
If you need to update your estate plan, contact Gehling Osborn law firm.