A lot of people procrastinate before they put estate plans in place. Going forward, many do not take action to make revisions as things change because a new cycle of procrastination takes hold.
This phenomenon applies to known circumstances, and there are people that have outdated estate plans because they are not aware of changes to relevant laws. With this in mind, we will provide some food for thought in this post.
Starting Out
You should have an estate plan in place as soon as you are a self-supporting adult. It will include a simple will or a living trust, and you should also account for possible incapacity.
A living will is the document that is used to record your preferences regarding life-support utilization. You can itemize each different type of life-support if you choose to do so, and you can include organ and tissue donation designations.
To account for scenarios that may arise that are not related to life-support, you can name a representative in a durable power of attorney for health care. To give this individual the ability to access your medical records, you should include a HIPAA release.
Marriage
If you get married, an estate plan revision will obviously be necessary. You and your spouse should get together and discuss the way that you are going to proceed. A joint living trust can be the centerpiece if you intend to own most of your valuable property jointly.
You and your spouse would be co-trustees while you are alive and well, and you would name a successor trustee to administer the trust after the death of the surviving spouse. While you are alive, you would have access to and control of the assets in the trust.
Children
Children will change the playing field again, and you can update your plan when additions to the family come along. You should name a guardian for the children in a simple will, and if you have a living trust, the trustee would be able to manage assets on behalf of the minor.
It is also possible to use a testamentary trust to account for assets that are earmarked for a minor that cannot handle money. This is a trust that is contained within a will, and it would be created after your passing.
Life insurance is a key element for young families. Term life insurance is affordable, and the trust can be the beneficiary of a life insurance policy.
Changes in Marital Status
A change in marital status is a major life event that will definitely make an estate plan revision necessary.
If you are getting remarried to someone that is younger as a person with means, you could potentially utilize a qualified terminable interest property (QTIP) trust to cover all of your bases.
You would name a trustee to administer the trust, and this can be a person that you know or a professional fiduciary like a trust company. Your spouse would be the initial beneficiary of the trust, and your children would be the successor beneficiaries.
If you predecease your spouse, the trustee would distribute the trust’s earnings to them for the rest of their life. When you are creating the trust declaration, you could choose to give the trustee the latitude to distribute portions of the principal when certain circumstances exist.
Your surviving spouse could also live in a home that is owned by the trust, and they can use other property that has been conveyed into the trust. They would maintain their lifestyle, but they would not be able to change the terms of the trust.
After their passing, your children would become the beneficiaries, and all of your responsibilities will have been satisfied.
Estate Tax Efficiency
Legacy preservation may become necessary at some point. The federal estate tax can have a significant impact if you are financially successful, because it carries a 40 percent top rate.
It is applicable on the portion of an estate that exceeds $12.92 million right now, but the figure is going down to $5.49 million in 2026. This threshold is called the exclusion, and we have an estate tax on the state level in Connecticut with the same exclusion.
If your estate is going to be exposed to taxation, there are steps you can take to mitigate the damage.
We Are Here to Help!
Our doors are open if you are ready to work with a Glastonbury or Westport, CT estate planning lawyer to update your plan or put an initial plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 860-548-1000.
Mr. Florin is admitted to practice before the courts of the State of Connecticut and the State of New York. He is also a member of the American Academy of Estate Planning Attorneys, the National Academy of Elder Law Attorneys, the Connecticut Bar Association, and the Fairfield County Bar Association.