Many people have been holding off on updating their estate plans because of the uncertainty in Congress about the future of estate taxes. There is little doubt among tax experts that the estate-tax rules will likely change before the end of the year, but complete estate plans deal with a lot more than just taxes. And while I am one of the biggest advocates that you’ll ever meet when it comes to reducing or eliminating estate taxes, this article is going to focus on all of the non-tax reasons that you may need to consider while updating your estate plan.
Let’s start with dispositive provisions. This is the language that you use to decide who gets what, and when. It is common to have restrictions so that children won’t receive large sums too soon. If you haven’t built these provisions in, you should seriously consider doing so. If you have provided for that, check to see that the specific language still fits. New circumstances - such as a pending divorce or illness - may have made your former choices no longer ideal.
What about your choices of the people appointed to serve, such as the executor of your will, the trustee of your trust or the guardian of your children? Are these choices still appropriate or the best people available for the task? Perhaps your children are now responsible, financially sophisticated adults who are ready to replace your aging sister as trustee.
Do you have a durable power of attorney? This document basically gives the appointee the same power to act over your assets that you have. This is very crucial if you are unable to act on your own behalf due to medical inability or distant travel. If you do have one, is that person still interested and capable of executing on such a broad, strong power? Beyond the person holding the power, do you know the rules of your financial institution? Some will only honor a durable power if it is less than a few years old, others only if it is on their form, and others may never honor your durable power without a big battle.
And lastly, do you have an updated health care power of attorney? This gives someone else the power to make health-care decisions on your behalf if you are unable to do so. Sometimes, even with a document, a battle or disagreement ensues over the health care of a loved one - but it is better than what happens if there is no such document.
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