By Jeffrey R. Wolfe, Senior Vice President and Manager, Wealth Planning Strategies
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As we turn the calendar to October, attention turns to seasonal events like falling leaves, tricks and treats, and our blog series identifying scary financial mistakes. Look for blogs every week this month from our Private Client Services team to “scare you straight” into addressing common financial oversights that can lead to frightening outcomes.
One particularly painful mistake can occur with an outdated estate plan. Maybe you created a will when your children were born and now you are celebrating grandchildren? Perhaps you’ve experienced a marriage, divorce, birth or death in your life, or the life of one of your loved ones, that changes the outcome of your plan? Did you know estate tax thresholds have jumped from $1 million to more than $12 million in the last 20 years? Any of these or many other life events can significantly affect your estate plan and potentially frustrate your legacy goals.
For example, perhaps you have an IRA, 401(k) or some other qualified plan that names an ex-spouse as a primary beneficiary. Even if you are divorced and you have court documents stating to the contrary, beneficiary designations usually trump such paperwork. Unless you really want to leave assets to your “ex,” you should review and consider updating your plan documents.
Or, if your estate plan has traditional estate tax funding language, it’s possible your entire estate may end up in a trust for your surviving spouse, with your spouse having restricted access to the funds. Simply speaking, for years many trusts are designed to take advantage of the estate tax exclusion amount with any excess dollars passing to the surviving spouse. When the exclusion was $1 million, this plan may have been highly effective; such a plan with the current exclusion of $12 million may create more complexity than needed to achieve your goals.
Another example may be that you named an aunt, uncle, parent or close friend to serve as your personal representative, successor trustee or child’s guardian. If it’s been several years since that decision, are those folks still the proper people for the role? Perhaps someone has passed, or you’re no longer close, or whatever the case may be.
In short, it’s worth reviewing your plan periodically to ensure it meets your legacy goals. If you have a life event, if the laws change, or at least every three to five years you should review your planning documents and update them accordingly. Don’t be horrified by your planning outcome and consider reviewing your plan soon.