We recommend to our clients that they do a “checkup” of their estate plan every three to five years. A checkup is necessary to ensure that your estate plan continues to be effective for gift and estate tax purposes. In addition, there are several non-tax reasons for checking up on your estate plan. Here are some things you should consider.
Where are your estate plan documents located?
In most situations, we hold original estate plan documents for our clients in our vault. We provide hard copies and digital copies to our clients. Over the course of the last few years, we have been maintaining digital records of all of our clients’ signed estate planning documents so that they are easily and quickly retrievable. If you do not already have digital copies of your estate plan documents, your estate plan checkup is a good time to ask for them.
Does the plan still make sense from a disposition standpoint?
Perhaps your estate plan includes provisions for elderly parents or young children. If your elderly parents have died or if their financial circumstances have changed, your plan may need to be revised. Similarly, you may have had young children or teenagers when you created your estate plan, and now your children are older and their needs, circumstances and future outlook may have changed. Initially, you may have created an estate plan that called for holding assets in trust for your children until they reached a particular age (such as 25 or 30). Upon review, however, changes in circumstances may dictate holding assets in trust even longer for your children—perhaps for their lives. You can achieve important creditor protection benefits for your children (including protection of assets from a child’s divorcing spouse) by keeping assets in trust for their lives.
Review your named fiduciaries.
An estate planning checkup will include a review of the persons whom you have named as the personal representative of your estate, trustee of any trust you’ve created, guardians of minor children, and agents under your power of attorney and health care proxy. With the passage of time, the persons whom you have named to serve in these roles may no longer be appropriate. Guardians of minor children, in particular, need to be reviewed every few years. The persons you named as guardians when your children were infants may no longer be appropriate for your ‘tween or your high school-aged child. Similarly, you may have chosen a sibling or parent to serve as personal representative or trustee, whereas a child who is now an adult may be the better choice. You should also review any professional fiduciary choices previously made, as those may need to be updated due to changes in financial institutions and retirement of key advisors.
Review beneficiary designations.
The beneficiaries of insurance policies and retirement plans should be reviewed to determine if they are still appropriate. In some instances, it may be desirable to name your revocable trust as the beneficiary of an insurance policy or retirement plan. Alternatively, it may be most beneficial to name a surviving spouse or your adult children. Your lawyer can advise you as to the best choice for your personal situation.
Review your durable power of attorney.
Under the Massachusetts Uniform Trust Code (MUTC), it is now possible to give your agent under your power of attorney the authority to amend and revoke your revocable trust. This is a significant power and should be discussed with your estate planning attorney.
Review the title to your assets.
The best planned estate will not be optimally effective if you neglect to structure the ownership of your assets in the way that will take advantage of the estate planning you have put in place. For example, in order to maximize your estate tax and generation-skipping transfer tax benefits, it might be advisable to split the ownership of jointly held assets into individual names or into each spouse’s revocable trust.
Consider whether to fund your revocable trust.
Probate avoidance is a primary driver for funding a revocable trust during lifetime. While probate fees in Massachusetts are not determined by the size of your probate estate, funding your revocable trust prior to death will significantly simplify and expedite the estate administration process. In addition, assets transferred into your revocable trust prior to death remain private, whereas probate records and the assets subject to probate become part of the public record.
Periodically reviewing your estate plan documents and your assets will help you develop and maintain the best estate plan for your particular situation.