Suggestions to Simplify and Strengthen Your Existing Estate Plan

If you have been keeping up on the reading of our newsletters, blog posts, and other mailers, you might have noticed that we have been urging our clients to review their current estate planning documents with their estate planning attorney.  Undoubtedly, it is very likely that if your estate plan has not been updated prior to 2009, that updates to your existing plan are warranted.  Either changes in the laws governing your estate planning documents or changes in your life or the lives of your beneficiaries’ are the catalyst for these necessary updates.

Many clients are surprised to learn that their current trust may be unnecessarily complex given some not-so-recent changes to the federal estate tax laws.  Since 2011, a feature of the new estate tax laws is the concept of “portability” of the federal estate tax exemption between married couples.  In simple terms, portability of the federal estate tax exemption between married couples means that if the first spouse dies and the value of the estate does not require the use of all of the deceased spouse’s federal exemption from estate taxes, then the amount of the exemption that was not used for the deceased spouse’s estate may be transferred to the surviving spouse’s exemption so that he or she can use the deceased spouse’s unused exemption plus his or her own exemption when the surviving spouse later dies.  Even more simply stated, portability provides relief from the complex A-B trusts that were commonly drafted prior to 2011.  Relief from the complex A-B trust structure means that your spouse will not have to be subject to onerous and unnecessary complexity that involves significant time and expense upon your death; but requires an update to your existing trust if it still contains the A-B trust provisions.

In 2009, laws at the state level were overhauled in the areas affecting your general durable power of attorney and health care power of attorney.  Failure to update these documents may potentially cause unnecessary delay, during what can already be a very difficult time, while you are incapacitated.

It has been our experience in reviewing existing estate plans with our clients that certain life events have caused their plans to become ineffective or inconsistent with their present intents and desires.  It is important that you take an inventory of your assets while checking title on these assets.  If you have sold or refinanced your home or opened new financial accounts, then you may want to verify that title is held by your trust.  It would also be prudent to verify the beneficiary designations on assets like life insurance policies and IRAs or other qualified accounts.  The underlying purpose of these suggestions is to ensure that your estate does not become subject to probate upon your death.

In addition to a change in a client’s asset inventory, certain life events such as the death of a loved one, children reaching adulthood or the birth of grandchildren may cause you to reevaluate your existing estate plan and consider other updates.  Lastly, there are a number of other important considerations that may cause you to strongly consider updating your existing plan.  The following is a short list of such considerations:

• Trusteeship – Many clients with outdated plans have other family members or corporate trustees appointed to serve as a Successor Trustee of their current trusts which might have been the chosen route when the children were still minors.  Upon review, many clients discover that the person currently nominated as trustee in the trust is not needed to serve in this capacity because the children have now reached a point of maturity that they can now be trusted to serve in this capacity.  In the alternative, you may want to consider the appointment of a professional trustee to avoid argument and contention amongst your children.
• Divorce Protection – It is an unfortunate reality that a child’s marriage may end in divorce.  What may be more unfortunate is that the inheritance that you may have provided for that child might become subject to the divorce settlement if not protected ahead of time. While you may not be able to accurately predict whether a child’s marriage will end in divorce, by updating your trust with “divorce protection provisions” you can have added peace of mind that regardless of the success of a child’s marriage the inheritance left to him or her will be protected.
• Asset Protection for You – Do you have concerns about your estate being eroded away due to potential frivolous lawsuits or other unforeseen liabilities?  Nevada is recognized as the leading jurisdiction in the legal area of asset protection.  Please be aware that to achieve asset protection through the use of a trust may require the creation of an additional trust that is commonly referred to as a Nevada Asset Protection Trust.
• Asset Protection for Your Heirs – Do you have concerns that the inheritance you will be leaving behind to your heirs may become subject to the claims of their creditors?  Your trust can be updated to incorporate provisions that would be designed to provide substantial asset protection for the benefit of your heirs.  Unlike providing asset protection for you, you may be able to update your existing trust to provide these protections.

A. Collins Hunsaker

If it has been years since you have had your estate plan reviewed by your estate planning attorney or you have concerns that your existing plan may not be designed to meet your present intents and desires, we strongly encourage you to call our office to schedule a consultation for a review.