The New Year is the Perfect Time to Update Your Estate Plan
We would like to add one more item to your list of New Year’s resolutions—reviewing your estate plan.
Why is it so important to keep your plan up to date? In a word, change. As you grow older, your needs inevitably change. So, too, does your health, your income, the value of your assets, and your overall financial situation. The needs of the people you love change as well. Your children may get divorced and remarry, or begin families of their own. Sadly, a loved one might suffer a financial setback and accrue significant debt, or fall under the influence of a person you don’t trust, or even develop a dependency on alcohol or drugs.
In addition, the law itself is in a constant state of change, as are the financial landscape, the tax codes, and more. New or amended laws may make certain asset protection strategies and tools less effective, while at the same time creating new opportunities for wealth preservation and growth.
While it is important to review your plan every year, if you or your loved ones experienced significant changes over the course of last year, it is crucial to have your plan reviewed as soon as possible. With the right estate planning, you can find the support you need to make choices that best suit your specific situation. Be prepared for 2023!
Start by asking yourself these three important questions:
1. Have I Experienced Any Major Life Changes Over The Last Few Years?
Major life changes may be a good reason to reasses your estate plan if prior documents you have in place need to be updated. Alternatively, if you have recently come into assets or inheritance and never had an estate plan, now is the time to put one in place. Consider the following examples:
Seeing the final paperwork may have brought a sense of relief if you have gone through a divorce, but what if you have advance directives or a Will that put your ex-spouse in charge of your affairs?
Although they may no longer have a claim on your assets, you may have appointed them as the person who should make medical decisions for you or who would be in charge of your estate. This may no longer be what you want, which means these documents should be updated. Whether it is a Will, health care proxy, power of attorney, or other directives.
Suppose one of your parents has recently passed away and you are now be the owner of new property or be in receipt of insurance proceeds, savings, or other funds. If something happens to you, what would you like to happen to these assets?
If you do not have a Will, speaking with an estate planner is an excellent idea to ensure heirs of your choice benefit, instead of leaving the decision up to your state’s default rules.
Many more life changes such as second marriages, the birth of a new child, or simply a change in heart as to who and what matters the most are all valid reasons to reassess your current estate plan.
2. Has a Spouse or Loved One Recently Passed Away?
Although dealing with the death of a loved one is difficult, not doing so may adversely affect any inheritance you wish to leave to loved ones. This is because of federal tax portability. Looking into portability may benefit you if your spouse has passed away in the past five years. This can make a big difference for your heirs and prevent them from owing taxes to the IRS.
3. What Would Happen If I Became Incapacitated?
An important matter to plan for is if you become incapacitated and cannot make decisions for yourself. Planning for this is crucial because you don't want to leave your loved ones with the inability to make decisions for you.
The documents for this situation are generally known as advance directives, but the terminology varies from state to state. They typically encompass the power to act on your behalf to make medical decisions, power to act on your behalf to manage your personal affairs, and have access to information.
As you reflect upon the changes that took place last year, and look forward to the new year, we hope you also consider the implications of these changes for your estate plan. As always, we are here to assist you.
If you would like to start or update your estate plan, please call our firm at 978-657-7437!
If you are ready to speak with one of our attorneys about updating your estate plan, you can book a Strategic Planning Session with us now!