Each new year brings the possibility and challenge of updating one’s estate plan. For many of us, the last time we created a plan was when our children were very young and needed guardians and our primary goal was to leave enough money to educate them.
As our children have grown, their needs and ours, changed. Now we may have children in frail marriages, or with substance abuse problems, or even their children may have similar challenges.
The goal in estate planning is to make sure your plan is current and provides for the needs of your family and heirs today, not yesterday.
So, here is a brief checklist of items to consider:
- Make sure your beneficiary designations on IRA’s, life insurance and other ‘pay on death’ accounts are current. You may find that the last time you looked at these you didn’t have children, or your children have grown, or you are remarried, etc.
- If you do have younger children, make sure that your guardian nominations in your wills are current and reflect your current desires. Remember, if you don’t nominate a guardian, the court will choose one without your guidance.
- Do not leave any asset, whether by will or pay on death designation, to minors. A minor does not have legal capacity to own property. A minor who inherits assets will need a conservator appointed by the court to hold the property until the minor is 18 years old, and then distribute outright. Always create a trust arrangement to appointment someone to manage the minor’s assets and distribute at a more appropriate age.
- Consider the needs of your beneficiaries, whether it be children with disabilities, addiction issues, etc. Your plan should take these needs into account.
- If you have a will or trust that is more than 7 years old, you are likely out of date with federal tax laws. The estate tax system has undergone many changes, not only in the amounts of the exemptions but the ability of a surviving spouse to use the exemption of a deceased spouse. Plans created under the previous laws are not simply out of date; they may also cause more, rather than less, taxation.
- Update your plan if you are divorced or remarried.
- Make sure that all your ‘helper’ roles are up do date. These roles include your personal representative (also known as executor) under your will, your financial agents and health care agents. If you do not have good ‘go to’ choices, consider paid fiduciaries and trustees.
- Finally, always consider the fact that it is possible for your heirs and beneficiaries to inherit with creditor and divorce protected trusts. A trust of this nature is created in one’s will or trust upon death for the benefit of beneficiaries. The trust provides discretion to a trustee to distribute to the beneficiary for ‘health, education and maintenance’. The trust itself is protected from any of the beneficiary’s creditors and from loss in a divorce. In Arizona, unlike some other states, the beneficiary may also be the trustee without losing the protection. However, in many cases it may be appropriate for a third party to serve as the trustee.