Statistics show that most Americans do not have estate plans in place, but the majority of people that are polled also say that they think estate planning is important. They simply put it on the back burner for various different reasons.
Since procrastination is widespread, when they do take action, they put the documents away for safekeeping and they close the book on the subject. In reality, this is a misguided perception.
Estate planning is not a one-time event unless you put your estate plan in place during the final stage of your life. As they say, the only constant is change, so estate planning is actually an ongoing process.
The original estate plan that you devise will be based on your life situation at that time, but circumstances can call for estate plan revisions, and we will look at some of these situations here.
Changes to Relevant Laws
There are various laws in place that can have a direct impact on the way that you plan your estate, and estate tax statutes are certainly in this category. Most families do not have to pay the estate tax, because there is a high credit or exclusion that can be used to transfer a certain amount tax-free.
The exclusion is set via legislative mandate, so it is always subject to change, and the rate of the tax can change as well. In 2021, the exclusion will be $11.7 million, but it is going down to $5 million adjusted for inflation in 2026 if there are no changes in the meantime.
Of course, there can in fact be changes between now and then, so this is an evolving situation. We also have an estate tax on the state level here in New York with a $5.85 million exclusion in 2020, and this is also subject to change.
If your estate plan was constructed when you were not exposed to the estate tax, there would be no tax efficiency strategy, but it could be necessary if changes are implemented.
There is another tax related situation that is in flux. As it stands right now, inherited appreciated assets get a step-up in basis. The inheritor does not have to pay capital gains taxes on appreciation that took place during the life of the decedent.
Some lawmakers have proposed the elimination of the step-up in basis because it is used by wealthy families as a tax efficiency strategy. One of these lawmakers is Joe Biden, and since he won the election, this is certainly a possibility.
These are couple of the issues that are percolating at this time, and other relevant legislative mandates can enter the picture. If you resolve to work with an attorney to review your existing plan on an ongoing basis, you can make any adjustments that may be necessary.
In addition to the events that are out of your direct personal control, your life and your family dynamic may take twists and turns over the years. There can be additions and subtractions, and many people go through changes in marital status.
Your financial capabilities can improve over time, and the difference may be dramatic. Estate taxes can become a factor, and short of this, you may want to restructure your approach in light of your success.
Once again, if you recognize the fact that estate planning is a process, you can take the right steps along the way to revise the plan to reflect current circumstances.
Schedule an Estate Plan Review Today!
Many people make New Year’s resolutions, and the turning of the calendar can be a great time to take care of responsibilities that you have been putting on hold. Periodic estate plan reviews are a must, and as they say, there is no time like the present.
If you are ready to get started, you can schedule a consultation appointment if you give us a call at (585) 546-1734, and you can fill out our contact form if you would prefer to send us a message.