By Dave Ison

With the arrival of the new year, I remind my clients to take time to examine their estate plans. Because nothing stands still in our lives, estate plans need to reflect those changes. But, I also recognize that facing an estate planning revision raises a host of questions, and complex issues too – even the potential for disagreements in a family.

After all, to think about estate planning reminds us that we won’t be here forever. I know that might sound pessimistic. But, the facts are that ignoring an estate plan change could easily leave your loved ones at significant financial and legal risk. No one said it would be easy. Estate planning raises difficult questions about who will receive your assets, how much of those assets, by when, by what means, and who will manage it all after you are gone. Resolution of these issues is not magic. It requires you to make decisions.

Postponing and procrastinating is a decision not to decide. Without a well-organized, up-to-date estate plan that clearly states your wishes, your loved ones could be left in a difficult and expensive bind. It leaves open the chance for family misunderstandings, and the consequent bitterness that can haunt a family for years.

The Impact of Tax Cuts and Jobs Act of 2017

The Tax Cuts and Jobs Act of 2017 continues to have its impact, especially for estate planning. One of its most important elements was the allowance for an increased size of an estate not subject to federal estate taxes. In real dollar terms this means that an estate exemption went from $5.5 million to $11.4 million in 2019.

The portability option also allows a surviving spouse to use the unused portion of the other spouse to add to their own $11+ million exemption. Note: Federal Form 706 must be filed even though no estate tax may be due. The form is required to preserve the portion of the deceased spouse’s exemption amount that is unused at the time of death.

Also new in 2019, an individual can gift up to $15,000 to as many people as they want while the gift will be exempt from federal gift taxation.

A Word of Caution

The expanded $22.8 million exemption for husband and wife might suggest that there’s no compelling need to set-up an estate plan. After all, there’s no federal estate tax due. But, that misses the most important questions – who gets what, when, and how. In fact, almost all estate have been exempt from federal estate tax for many years, since the exemption increased to over $5 million. Just because an estate is under the federal exemption amount does not mean you will have no problems at the time of death.

Wills Or Trusts? It Depends.

The two most commonly used instruments for estate planning are wills and trusts. They each have their purpose, and each are appropriate to circumstances. But, both have tradeoffs.

Setting up a trust can be more complicated than a will. It’s usually more expensive and time consuming too. Assets have to be transferred to the trust. Titles and deeds might be required to change. There are numerous issues to resolve in the process.

On the other hand, a will can be easier and less expensive than a trust. But, it’s not uncommon for a will to be more costly later in the process, especially if court action is required during the settlement period. More importantly, a will only transfers “probate assets” after death. Any assets that are not probate assets, may transfer to persons or under circumstances you do not want.

If you already have a trust, but are considering another estate instrument like a will, please contact me to discuss the pros and cons of your unique situation.

Lives Change. Estate Plans Should Reflect That.

Estate plans are never static. They are created to reflect the current dynamics of a benefactor and his or her family. But, along the way, families change. Couples divorce. Children marry. More children are born and so are grandchildren and great grandchildren. Fortunes change, sometimes for the better, or worse.

An estate plan must be adjusted accordingly. To ignore these realities puts you at risk for magical thinking.

I urge you to take a careful look at your estate plan. With the changes to the federal tax code offering more estate tax exemptions, that alone should inspire you to revise your estate plan structure.

Feel free to contact me. I have worked closely with many clients over the years, helping them arrange the right estate structure as their lives evolve. I look forward to assisting you.

Thank you,
Dave Ison