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5 Reasons to Update Your Estate Plan Now

Written by Jeffrey Skatoff • July 20th, 2013

Estate Taxation,  Estate Planning,  

Estate plans should remain relevant to current family relationships and to the current state of the law.  Here are 5 reasons to look at your current estate plan.

The estate tax exemption amounts seem to have been reset at a permanently higher threshold.  After over a decade of uncertainty, the estate tax exemption amounts seem to have been fixed based on legitimate bipartisan compromise - which means thet are likely to be stable.  The estate tax exemption amount is now $5.25 million per person.  Many older estate plans rely on the use of trusts to reduce estate taxes.  For example, many plans will require that a "credit shelter" trust be funded with the current estate tax exemption amount at death, with the remainder going directly to the surviving spouse, or into a trust for the benefit of the surviving spouse.  This type of estate planning will preserve the exemption amount on the death of the first spouse.  If the total estate is below the $5.25 threshhold, this complex estate planning, if done only for estate tax purposes, is unnecessary.

Changes in family structure.  Marriage, divorce, the birth of a child - these are always reasons  to revisit an estate plan to ensure that it matches the current family structure.  For seniors, however, it might be more important to look at the family situation of children and grandchildren.  For example, an original estate plan might leave the assets to children outright and free of trust.  Fast forward to today, and your children could be in unstable marriages, have become wealthy in their own right, could have special needs children of their own, or could be in professions where they have a likelihood of being sued one day.  So, the need for estate planning with trusts could be of paramount importance - not for estate tax reasons, but for real world reasons.

Same sex marriage.  The Supreme Court, In United States v. Windsor, held that the federal government is required to treat married same sex couples the same as married opposit sex couples.  For estate planning purposes, same sex married couples are entitled to the unlimited marital deduction for lifetime giving and deathtime bequests.  All same sex couples who are, or who are thinking about marriage, need to revise their estate plans.

Changes in economic situation.  After having been so bad for many years, the economy seems to be gaining forward momentum.  The stock market has made an all time high, and real estate values seem to have come back in many areas.  Do your assets now exceeed the taxable minimums?  If so, an estate plannign tuneup may be in order. 

State estate tax changes.  For many people, it is not the federal estate tax tht applies, but the state estate tax, which can kick in at much lower amounts of wealth.  Ohio has eliminated its estate tax, while New York's estate tax exemption amount remains at $1,000,000.  These state estate taxes typically apply not just to persons who die resident on one of these states, but also to persons who own property in the state. 

Jeffrey Skatoff is an estate lawyer in Palm Beach County and Martin County, Florida.