There’s a lot of talk this time of year about resolutions, goals, and changes that people want to make in their lives. The best joke that I heard on this subject was one fellow who said that for his new year’s resolution, he’d like to keep his computer screen at 1280 x 1024. I’d like to throw out a serious suggestion for a goal for 2015; but I won’t be asking you to improve your health through exercise or better eating.
Estate Planning. That’s a broad category, but I have two targets: 1) those who need to implement their first estate plan; and 2) those who need to review and update their existing estate plan.
Initial Estate Planning: This one’s pretty obvious, and for those that fit into this category, you know who you are. It may be an awkward topic or it might scare you to talk about estate planning. But it’s not as bad as it might seem. Just get it done and you will feel better and more prepared for the future.
Review and Update: This category scares me because I am afraid that there are still a lot of people that need to have their old estate plan reviewed. A trust originally drafted and signed in the ‘90’s or early 2000’s, likely needs to be updated. We at JEFFREY BURR have talked a lot about this with newsletters to our clients, letters discussing estate tax updates, and this blog.
Our concern is that a lot of these old trusts may have language requiring the surviving spouse to divide and allocate the entire trust estate between two separate sub-trusts. These divisions into sub-trusts were originally intended to reduce or eliminate the impact of the federal estate tax. But the estate tax laws were significantly changed in 2012. The 2012 estate tax changes made permanent a much higher exemption amount ($5 million per spouse – indexed for inflation), and the idea of portability of the estate tax exemption was introduced. Portability allows a surviving spouse to claim and preserve a deceased spouse’s $5 million exemption regardless of the details of their estate planning or even without having a Will or Trust in place. And the increase in the exemption amount means that far fewer people will be impacted by the federal estate tax.
The combined result of these changes is that married clients with an estate less than $10 million may be able to greatly simplify their trust by removing the requirement to divide the trust. While this administrative burden to divide the trust upon the death of the first spouse may no longer provide a tax advantage, it may be a mandatoryrequirement of the trust contract and the surviving spouse may have few options other than to fulfill the mandatory obligation to divide and operate the trust as two or three trusts after the first spouse’s death.
Please make an appointment with your estate planning attorney to have your trust reviewed. It won’t take too long because most attorneys will be able to quickly identify if an update is warranted and 2015 is a great year for a checkup if you haven’t had one in a while.
- Attorney Jason C. Walker