This article addresses the new 2013 tax law changes and some thoughts when an estate plan should be reviewed. The article considers whether your state has an estate or inheritance tax (like Illinois, New York, and Pennsylvania, to name a few), as well as changes in family or financial situations. This led to a few other thoughts as to why it may or may not make sense to update an estate plan in 2013.
- Guardian and Fiduciaries. Is the guardian currently named in your will, the one you would still like to serve? Have children grown older, and perhaps a different person would be a better choice? What about the executor and trustee of your estate plan? Are these fiduciaries still the correct choice to manage the assets of and administrate your estate?
- Spray Trusts. For states that do not have a state estate or inheritance tax, a spray trust is a way to provide not only for the surviving spouse, but also the children and grandchildren. The primary beneficiary is the surviving spouse, but a flexible Trust B, which holds the unified credit (currently $5.25 million less any lifetime gifts), allows the trustee to distribute assets not only to the surviving spouse, but also to the next generation to pass income to those in a lower tax bracket, as a way of helping with health and education costs, or simply a way of supporting family members.
- Outdated Trust B Language. Some trusts allocate the remaining unified credit to Trust B for the benefit of only a decedent’s children and grandchildren. This language was very popular when the unified credit was $750,000, now, the unified credit is $5.25 million, and for some families, this Trust B may be the only trust created on death. Not changing this language may unintentionally leave a surviving spouse out of receiving any assets. This language should be reviewed to make sure that all beneficiaries receive the amount intended.