The recent enactment of the American Taxpayer Relief Act lays to rest much of the uncertainty in the federal wealth-transfer tax laws that complicated planning efforts for roughly the last twelve years. Consequently, there is no better time than now to review the design and projected effectiveness of your current estate plan. Here are just a few items that may warrant an estate plan review:
1. Many husband and wife estate plans incorporate sophisticated tax formula clauses designed to eliminate estate tax or to at least defer the tax until the death of the surviving spouse; the recent enactment of the $5,250,000 personal transfer tax exemption ($10,500,000 per couple, indexed for inflation) could inadvertently cause an older formula clause to operate such that the assets available to the surviving spouse (after the death of the first spouse) are significantly less than what the spouses may prefer.
2. The ability now to transfer (or “port”) one spouse’s unused tax exemption to the surviving spouse may open the door for opportunities to simplify an estate plan, perhaps through the use of one spousal “joint trust”.
3. The higher tax exemption amounts allow for enhanced long-term planning in furtherance of the minimization and/or elimination of certain capital gains taxes that may be otherwise incurred by children or other beneficiaries of an estate plan.
4. The projected effectiveness of certain “probate avoidance” strategies should be verified via a detailed analysis of beneficiary designations on IRA’s, insurance products and “payable on death” accounts.
5. The current Personal Representative, Trustee and other “decision-maker” designations in the event of death or incapacitation should be reviewed to determine the appropriateness of same.
6. Certain circumstances could warrant the continuation or establishment of protective “continuing trusts” for children or other heirs having special needs or challenges (e.g. creditor issues, healthcare requirements, etc.).
7. Obviously, changes in personal circumstances or preferences can necessitate modification of an estate plan.
As they say, with certainty comes change. If Blalock Walters, P.A. can assist you with a review of your estate plan, please contact any of our estate planning attorneys … we’ll be happy to help.