Pivotal Life Moments are Key to Reviewing Your Estate Plan

Written by Attorney Erin L. Nunes, Esq., Partner

Estate planning needs often arise around pivotal life moments. Marriage, the birth of a child, divorce and death of a loved one tend to bring about a need for making new plans or updating a plan that was previously in place.  Here are the key elements to ensuring your estate plan addresses your family, legacy and purpose as you intend: 

  • Tax & estate planning
  • Life milestones & transitions
  • Philanthropy & gifting
  • Business & career transitions

A growing family is a great motivator for writing a will and making financial gifts. But children can also create new questions, such as how to select a guardian, or appoint a trustee or personal representative (also known as executor) – and why you may want to consider three different people for these roles. Do you know the differences between personal representatives, trustees and guardians?

As a family ages, clients naturally reach other pivotal stages and start to think about things like paying for college for their kids, while also looking at various levels of care for their aging parents. This is where guidance on gifting as it relates to taxes and/or Medicaid planning for long-term care becomes important. Also, as you work to get your own legal and financial affairs in order, consider that the same type of work may be needed on your parents’ financial matters.

Estate planning ramifications are often more pronounced in remarriages with blended families adding complexity and the need for clarity. Within blended family structures there can be concerns about inheritance size, naming an executor, and overall fairness. These concerns can bring up difficulties when making an Estate Plan, but they are important to address. Many challenging questions come up: How do I ensure everyone is well taken care of after I am gone? Should I leave everything to my spouse and hope they take care of my children? How do I avoid disinheriting my children?

Passing wealth from one generation to another is at the heart of estate planning. If you find yourself in this fortunate situation, it is wise to make generational connections early. Plan to bring your family in early to understand the goals for the wealth transfer and how to make it successful. Statistically the next generation is poised to be on the receiving end of the largest wealth transfer in history. One key factor in making it successful within you r own family is communication. That may sound obvious but more than half of wealth transfers fail due to inadequate preparation of the family and issues of trust and communication. Inheritances will most like come in the form of Trusts so having your legal advisor connected to both generations for the purpose of a successful transfer can also be key.

Another factor to be considered by high net-worth investors is charitable giving. In those cases, there are considerations like the timing of the contribution, not to mention which assets exactly to donate. The first step, however, is to determine where the donation should go. According to the National Center for Charitable Statistics, in 2020 there were more than 1.5 million nonprofits in the United State alone. This is where we encourage clients to define what’s important to them and how they wish to be remembered.

For high-net-worth clients, tax strategies are also an important consideration. This is where a client’s individual circumstances play a critical role. For instance, if a client understands the tax benefits of making a gift but is reluctant to give up access to the assets, there are trust strategies that allow some degree of access to the gifted assets. Many clients are concerned about a taxable estate upon death but don’t like the complexity. For these clients, there are some simple gifting techniques to consider.  Understanding the tax benefits of donating different types of assets and when can help clients make smart decisions for giving.

Not all windfalls come from a traditional inheritance. Some clients will sell their small businesses and create their own liquidity. Small business owners need to plan for the transition of their company in their estate plan. Considerations include the impact of state laws, multiple beneficiaries, keeping a business in trust, and how to plan for estate taxes.

Reviewing your plan at regular intervals in addition to major life events will help ensure that your legacy, both financial and otherwise, is passed on in accordance with your wishes and that your beneficiaries receive their benefits as smoothly as possible. One of the most difficult estate planning decisions is determining when and how to involve your family in any planning discussions. While the timing varies for every family, opening a dialogue reduces the potential for future discord when your plan is implemented. When circumstances change it may open the door for you to discuss estate planning with your loved ones. By doing so, you can establish peace of mind, knowing that you are prepared to weather the challenging times and help secure your family’s future.

As a side note, it is important that once you spend the time to create an estate plan that accomplishes your goals that the following two tasks are completed in a timely and accurate fashion:

  • Beneficiary Designations

We recommend regularly reviewing the beneficiary designations on investment accounts and insurance policies. A major reason for reviewing beneficiary designations on a regular basis is to account for changes in your family, such as a marriage, divorce, birth, or death. Assets such as retirement accounts, life insurance policies, and IRAs are guided by beneficiary designations — not by your will. Therefore, it is wise to review those designations annually or when your family structure changes.

  • Asset Titles

The concerns are similar when it comes to the title — the identification of the owner — of assets like bank accounts. The title determines how an asset or account gets passed along. If it’s titled “joint tenants with right of survivorship,” for example, it will pass to the joint owner. That title could create problems if it does not mesh with the overall estate plan.

Beneficiary designations and titling of assets are critically important. It’s also helpful to maintain an easily accessible list of beneficiary designations and titles for your own records.

The team of professionals at Surprenant & Beneski, P.C. can help you craft an estate plan that reflects your wishes and has the flexibility needed to remain effective as circumstances change or become uncertain. Our team will guide you through the estate planning process, adjust as needed, and help you build the legacy you envision.

Attorney Erin L. Nunes, Esq., Partner