How Healthy Is Your Wealth and Estate Plan? To Meet Your Objectives, Review and Update It Today

Estate Planner Mar-Apr 2001

If you have completed a comprehensive wealth and estate strategy or plan, congratulations! You may enjoy the peace of mind that comes from a well-developed and well-drafted plan. But strategic wealth and estate planning is not a static process. You must review and update your plan periodically to ensure it is still meeting your objectives.

Regardless of your age, taking an active role in wealth transaction management and asset protection is critical. For young, wealthy individuals with children in the future, strategic wealth planning is a complex necessity because your goals and strategies are even more likely to change over time. A death, birth, marriage, divorce, acquisition or sale of a family business, or a drastic increase or decrease in net worth warrants a review — and typically a modification — of your overall wealth and estate plan.

Getting Started

To review your current estate plan, make a copy of your will or trust agreement and take a red pen and mark an “X” beside any personal data or information that has changed. Also mark an “X” by any specific bequest you wish to alter. Put a question mark by any provision addressing estate taxes or trust continuation provisions you may need to review.

If only minor changes are necessary, a brief amendment to your revocable trust or will may be sufficient. If more substantive asset transfer provisions or tax saving techniques are required, executing a new will or amendment and restatement of trust may be advisable. This way all of your trust terms and instructions will be in a single instrument. A new will or amendment and restatement of trust is also useful if several previous amendments make it difficult to follow which provisions control and which have been superseded.

Are You Maximizing Tax Savings?

Currently each person may pass up to $675,000 of assets during lifetime or at death free of federal gift and estate taxes. This applicable exclusion amount is scheduled to increase gradually until it reaches $1 million in 2006. If your documents were executed before 1997 and you and your spouse’s combined estate exceeds $675,000, you should review your plan to determine the effect tax law changes may have on your situation.

If your individual retirement accounts (IRAs) or qualified retirement benefit plans — such as a 401(k) — constitute a significant portion of your estate, you must review and update your plan to ensure it addresses all related income and estate tax issues. Who you name as beneficiary of your plan and the distribution method you choose can have a significant impact on how much of your retirement savings goes to your loved ones and how much goes to Uncle Sam. Such issues must be resolved before your required distributions must begin — usually April 1 of the calendar year after you reach age 701/2.

Are You Minimizing Probate Costs?

If your plan includes a living trust, you must ensure that all your eligible assets are titled in the trust’s name. If such trust funding is not completed before your death, your estate may be subject to a court-supervised probate proceeding. Typically, probate fees and trust settlement fees will be greater than probate fees alone.

Don’t Wait Until It’s Too Late

Still not convinced that you need to review your wealth and estate plan? Consider these two key questions:

1. Has your relationship with your designated agents (such as your personal representative, guardian of a minor child, successor trustee or attorney-in-fact) changed?

2. Is it possible your plan may not provide as you wish for your loved ones in the event of your disability or death?

If you answer “yes” to either question, don’t wait to review your plan. Should you have any questions or require help in reviewing, updating or implementing your strategic wealth and estate plan, please give us a call.