5 Important Steps to Update Estate Plans

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The tumult of the current tax season is winding down, but advisors can provide a valuable additional service to their wealthy clients by encouraging them to closely review their estate plans to ensure these are up to date.

Estate plans are valid at the time they are signed, but sometimes years or decades pass before they come into play and circumstances change: assets grow or retract, designated trustees die, family members have falling-outs.

Keeping estate plans current is essential to protecting clients’ families and their assets, Blooma Stark, an attorney with Aronberg Goldgehn Davis Garmisa, said in a telephone interview with AdvisorOne.

See also: 8 Estate Planning Mistakes to Avoid

Stark noted that accountants are often the advisor clients see most often—at least once a year—and so are well positioned to recommend an estate plan review. In contrast, clients may see their attorneys only at wide intervals. She said she had just spoken with a client who had prepared an estate plan 20 years ago, and only recently realized she needed to update the plan.

Stark listed five estate plan areas to which advisors can direct clients’ attention for review. Doing this now “can save a lot of time and aggravation down the road,” she said.

1. Review Documents

It’s essential that a client’s estate plan documents align with his or her current situation. Often a review will show one or more of these need to be updated, Stark said. Especially important are the will, power of attorney, living will and trust.

2. Determine Familial Situation

Clients should assess whether their relationships with people they’ve named as guardians, executors, trustees or agents under a power of attorney are in good standing. If not, they will need to appoint others to fill those roles.

3. Assess Sub-Trusts

Children grow up, and often their adult circumstances are different from those envisaged at the time the client formulated the estate plan. They may now have children of their own, requiring the arrangements of trusts to be changed. For example, Stark said, clients may decide that their children are sufficiently wealthy not to need to be direct beneficiaries and so execute a generation-skipping trust to ensure their grandchildren will be well provided for.

4. Update Schedule of Assets

A critical issue clients often overlook or are unaware of is that an asset such as a second home does not automatically become part of their trust; the asset must be transferred to the trust during their lifetime. Failure to do this will likely result in probate costs that can escalate.

5. Evaluate Changes in Estate Tax Law

Depending on the net worth of the client’s estate, changes in the law may make it advisable to change estate plan documents. This year is a prime example, when so much is up in the air about the so-called Bush tax cuts. In 2013, for example, the estate tax exemption of $5 million could drop to $1 million, or some figure in between; nobody knows.

See also: Estate Planners: 9 Months Left for Tax-Free Transfer of $10 Million

Stark, like so many others who advise wealthy clients, said she has given up trying to crystal-ball what will happen next year. She is advising her high-net-worth clients to make gifts this year to take advantage of the current exemption.


For more on estate planning, see:

Estate Planning for Beginners

Do Estate Planning Attorneys Make Good Strategic Alliance Partners?

KIS-ing Estate Planning


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