If I’ve said it once, I’ve said it a thousand times: Reviewing and revising your estate plan is important. In fact, it’s almost as important as having one at all. Unfortunately, on top of the 30–40% of Americans who do not have an estate plan, there are many, many more people who have woefully outdated plans.
When you think about estate plan maintenance, it may be helpful to compare it to automobile care. Basic maintenance is necessary to keep your car running smoothly: Oil changes, tire rotations, new wipers, etc. But you will also need to make occasional specialized repairs if the tires are bald, the timing belt snaps, or the exhaust pipe rusts.
Your estate plan also needs periodic oil changes and tire rotations, as it were, as well as new spark plugs or brakes every so often. In other words, estate plans need both basic maintenance and specialized repairs.
Yearly Estate Plan Maintenance
The following list is a good place to start as you think about what estate planning goals you want to accomplish this year.
Review your core estate plan documents
- Will or revocable living trust (e.g. trustees, beneficiaries, and guardianship for minor children),
- Financial power of attorney, and
- Living will or healthcare directive.
Review planned gifts and charitable donations
- Educational and medical exclusion gifts,
- Charitable donations,
- Funding of 529 Plans, and
- Funding of trusts.
Pro Tip: The annual gift tax exclusion for 2022 is $16,000, and gifts need to be made by the end of the year. It’s also important for the gift “checks” to be cashed before December 31 too. If they aren’t, the IRS may contest the year of the gift.
Review retirement plans and health savings accounts (HSAs)
- Fund employer-sponsored retirement plans (e.g. 401k),
- Fund non-employer retirement plans (e.g. traditional and Roth IRAs),
- Fund health savings accounts (HSAs), and
- For those over 72 (or 70½ before Jan. 1, 2021), check that required minimum distributions (RMDs) from pre-tax retirement plans have been made.
Review your primary and secondary beneficiary designations
- Retirement plans,
- Life insurance policies, and
- Payable on death (POD) bank and brokerage accounts.
Review titles of jointly-owned property documents
- Deeds to real property, and
- Titles on accounts.
The yearly reviews may or may not turn up something that you need to tweak. But certain events are more likely to require revisions to your estate plans:
- Life Events: Important personal milestones or major family events such as marriages and divorces, the birth of a new child or grandchild, or changes to intra-family dynamics.
- New Assets: Reorganization or additions to your asset portfolio including real property, stock holdings, retirement accounts, or insurance policies.
- External Events: Uncontrollable factors like changes to economic, political, global, environmental, or legal circumstances.
Before and after any of these events, how you want your property and assets distributed may change significantly.
Keeping Your Estate Plan Updated
Regardless of whether we’re talking about routine maintenance or adapting to major life changes, it is in the best interests of you and your family to make sure that your estate plan accurately reflects how you want your assets handled.
But your estate plan will not magically update itself. You have to make sure you conduct yearly reviews and discuss any larger changes with a qualified estate planning attorney. Whenever you’re ready, call, text, or email me to set up a time for your end of year estate planning review.