Studies are conducted on an ongoing basis to measure the estate planning preparedness of American adults. They consistently find that a surprising number of individuals are going through life without any of the appropriate documents.
In fact, the 2020 survey that was conducted by Caring.com has found that the preparedness is actually decreasing rather significantly.
Since so many people are prone to putting this basic responsibility on the back burner, once they do take action, they breathe a sigh of relief. They tuck the documents away for safekeeping, and they feel as though the matter is closed once and for all.
Updates Will Become Necessary
This is definitely the wrong way to look at it. Estate planning should be viewed as an ongoing process. The first estate plan that you put in place will be based on a snapshot of your life at that time. Invariably, changes will come down the pike that trigger the need for estate plan updates.
For example, a significant percentage of marriages end in divorce, and most people that get divorced remarry eventually. Changes in marital status are definitely going to impact your intentions with regard to the beneficiary designations, asset distributions, and health care agents.
Obviously, most people will realize this, but they may once again start to procrastinate. It can always seem like you will have a chance to make the necessary changes later on, but people pass away unexpectedly every day. Plus, if you were to get seriously ill rather suddenly, would you be in a position to work with an attorney to revise your plan?
There is also the matter of entering into different stages of life when your priorities invariably change. An estate plan that you devise when your children are dependents will look a certain way, but once they are grown and out of the house, the entire complexion can evolve.
Of course, there will often be additions to the family, and this is another relevant factor. On the other end of the spectrum, people that are part of your estate plan in one way or another may predecease you.
Estate Tax Factors
For a small percentage of people, estate tax exposure can enter the picture at some point. The exclusion, which is the amount that can be transferred before the tax would be applied. On the federal level, it is $11.7 million in 2021, but is scheduled to decrease to approximately $6 million in 2026. Moreover, there is pending legislation that would reduce the exclusion to $3.5 million.
If you experience a dramatic improvement in financial status, and your estate plan was put into place when you were not exposed to the estate tax, changes could be necessary.
Conversely, the estate tax exclusion was around $5 million prior to 2018. Someone that is now exempt could have been exposed at a previous time, and this would be a dynamic that would call for an estate plan adjustment.
Here in New York, we have a state-level estate tax as well. The exclusion is $5.93 million, so this tax can be a factor for you even if you are not subject to the federal estate tax. Once again, if you are in a different financial place than you were when your plan was constructed, it is possible to alter it to include an estate tax efficiency strategy.
Access Our Free Worksheet!
Our firm has prepared a very effective, easy to use worksheet that you can use to gain a more thorough understanding of the estate planning process. There is no charge for the worksheet, and you can get your copy if you visit our worksheet page and follow the simple instructions.
We Are Here to Help!
If you recognize the fact that your estate plan should be adjusted, or if you are ready to put an initial estate plan in place, we are standing by to assist you. To schedule a consultation appointment, call us at 585-374-5210. There is also a contact form on this website that you can use if you would like to send us a message.