Each year as I prepare my taxes, I’m reminded of the need to re-evaluate my overall estate plan for potential tax issues and implications. What are a few items I should be looking for?
by Jennifer Robinson on March 09, 2011
1. Review your will and/or trust to make sure it reflects the beneficiaries you want to provide for and that it names the person you want to handle your affairs. A changes such as a birth, death, marriage or divorce can affect those you have named in the document. If the person you have named to handle your affairs cannot serve or does not want to serve, the named successor (if any) can be appointed. If there is no successor named, then typically the person chosen by a majority of the beneficiaries will be appointed to serve, assuming they qualify under the requirements set forth in the Florida statutes.
2. Review your will and/or trust to make sure it disposes of your assets upon your death in a way that you desire. A change in a family situation or a change in the value of your assets will likely trigger a need to change your estate plan. A marriage, divorce, birth or death could affect the estate plan you have in place. For instance, if a person named has already passed away, the will or trust should state what should happen to those assets. Will the asset pass to the named person’s estate, his/her spouse or children, or will the property lapse and be treated as it never existed?
3. Review a copy of your retirement plan beneficiary designation forms (such as IRAs, 401Ks) to make sure they are not outdated. For example, if you are divorced, you should be sure to update all retirement plan beneficiaries, as well as your life insurance beneficiaries. Divorce only eliminates the person from being named your beneficiary under your will. Once you have a contract with a company (i.e., a signed beneficiary designation document), they are required to honor that contract. Similarly, if someone you have named as a beneficiary has passed away, you should update the form because the retirement plan itself may dictate who gets the funds if there is not a contingent beneficiary named.
4. Review how your assets are titled to make sure you have not altered the way your assets will pass. For example, an asset titled in joint name with rights of survivorship will pass to the surviving joint owner. However, if when the person prepared their estate plan, the account was titled in their individual name, they would expect that account to pass pursuant to the terms of their will or trust. By changing the title of the account to joint names with rights of survivorship, the asset will no longer be controlled by the individual’s will or trust but rather by Florida law that govern joint assets. Thus, changing the title of assets can wreak havoc on an estate plan that that was carefully thought out and planned.
5. Review new estate tax laws with your advisors to help minimize estate taxes. In December 2010, the exemption from Estate Tax was increased to $5 million dollars. The $5 million exemption however is scheduled to expire on December 31, 2012. It is uncertain what the exemption amount will be changed to, however, some say $3.5 million and others say $1 million. Therefore, you should plan to speak with your estate planning attorney and advisors between now and mid-2012 to make sure you have a plan in place to minimize any estate taxes.
For more estate planning tips and guidance, please contact Jennifer Robinson.