Christine R. Settle | Posted on Jul 24, 2021
As you may already know, numerous tax law changes have been proposed by the Biden administration. Some of the potential changes include: increases of tax rates for top earners, alterations to tax brackets, new calculations for capital gains taxation, and changes regarding transfers of property and gifts. The proposals could also eliminate cost basis step-up laws drastically affecting estate planning for many Americans. If these tax laws are enacted as presented by the current administration, the effective date of the changes could be December 31, 2021 and, perhaps, retroactive to April 28, 2021. Of significance, these proposed tax law changes would alter more than a century of tax law.
If you have taken steps to obtain and complete estate planning documents including a Last Will & Testament, Powers of Attorney (POA) and Living Will, then you are on the right track to ensuring your estate is properly executed according to your wishes. Yet, it’s important to note these documents are not “once and done” and do require a periodic review. The timing of the impending tax law changes makes the need greater than ever to review your estate plans with your attorney, tax advisor, and investment advisor.
Many estate planning professionals—such as attorneys and financial planners—recommend a review of these documents every three to five years or any time you experience a major life event. Below are six reasons or circumstances for which a review would be appropriate, in addition to the proposed federal tax law revisions:
- Marriage or Divorce. Changes in family relationships trigger an immediate need to review your estate plan to include a new spouse or to remove a former spouse.
- Children. Make sure your legal documents include specific language for any children including biological and/or adopted children, stepchildren, as well as any you may want to disinherit. Additionally, as children are born and grow up, it may be necessary to update the documents to include named guardians for minors or perhaps altering the age requirements for children to receive funds.
- Domicile and Related Tax Changes. If you have moved from one state to another, state laws may differ and may continue to change. Although your Last Will & Testament will likely remain valid between states, many other legal documents may be more state specific such as a POA or Living Will. It’s best to consult an attorney in your new state for guidance.
- Beneficiary Changes. Over time, your preference for named beneficiaries may change. Children are born, parents or siblings may pass, and your direction for philanthropic gifts may evolve to accommodate something new. Changes in your Last Will & Testament or other estate planning documents can be completed by consulting your attorney. It’s also important to remember that retirement accounts, annuities, and life insurance policies have direct named beneficiaries and any changes must occur through the account administrator of record.
- Health Changes. If you or your spouse experience a significant health crisis, your estate plans could be impacted significantly—based on the cost of healthcare and treatments required—and could ultimately affect your asset distributions.
- Asset Changes. If you experience a change in assets—positive or negative—it’s prudent to review your estate plan. For example, if you receive an unexpected inheritance, you may need to reconsider your named beneficiaries or how and when they receive funds. Conversely, significant unplanned expenses could change your final wishes as well.
These are just some of the reasons to review and update your estate planning documents, but you may have a few unique circumstances of your own. It’s best to address the large events and life changes as they occur, rather than risking a plan that doesn’t truly reflect your intentions.
It is always recommended you seek the advice of your attorney and/or trusted financial professional when planning for the future, particularly with regard to the proposed federal tax changes highlighted earlier in this article and how they may apply to your individual estate planning. Like other financial institutions with trust powers, NWSB Bank can assist in estate planning matters with experienced staff to serve as a professional fiduciary in the capacities of executor, trustee and/or financial power of attorney for individuals in our community.
Estate planning can be overwhelming and isn’t always the highest priority in life. Give yourself peace of mind and consider reviewing your own estate plan now.