As we enter a new year, it is time for reflection, and some people think about the responsibilities they have been placing on the back burner. From an estate planning perspective, procrastination is always going to be an issue. Clearly, the subject is often avoided, and folks tend to think they will have time to take care of it in the future.
In fact, two-thirds of American adults do not have estate plans in place. Moreover, those that do take action often breathe a sigh of relief. They tuck the documents away for safekeeping, and they feel as though the responsibility has been handled once and for all.
This is another potential problem, because things can and do change. You may know that your current estate plan should be updated without taking action. And there are those that may not be aware of the fact that they should make adjustments because they are not apprised of changes to relevant laws.
Let’s look at some of the reasons why estate plan adjustments may be necessary as we go forward into 2023.
Additions and Subtractions
If your estate plan was created many years ago, your family dynamic may be different. A change in marital status can enter the picture, and this will obviously trigger the need for an estate plan update. However, some people that are in this position drag their feet, but you never know what the future holds.
Plus, when you plan your estate, you name an executor and/or a trustee. You have to update your plan if the individual or individuals that you choose are unable to assume the role for one reason or another. While you are doing so, you can name alternates so there is always someone in line if something happens.
This also applies to beneficiaries that are named in a will or trust, and it extends to the beneficiaries of life insurance policies and individual retirement accounts. If you have not named successors, you should definitely revise your plan to cover all your bases.
Then there are youngsters that come into the world along the way. Your estate plan can be updated to include new members of the family as it becomes necessary.
Changes to Relevant Laws
As a layperson, you are probably not going to pay attention to every legislative measure that is enacted that could impact your estate plan. On the other hand, this is our business, so we are always apprised of these revelations.
For example, the SECURE Act that was enacted in December of 2019 eliminated the so-called “stretch IRA” estate planning strategy for inherited individual retirement accounts. It has been eliminated, and this will impact some estate plans.
There is also the matter of the federal estate tax, and there is a looming change at the present time that many people do not know about.
The exclusion is a certain amount that can be transferred tax-free before the estate tax becomes applicable. From 2011 through 2017, the exclusion was $5 million indexed for inflation. At the end of 2017, the Tax Cuts and Jobs Act was enacted. It raised the exclusion to a record high $11.18 million.
There have been adjustments to account for inflation since then, and the exclusion will be $12.92 million next year. At the end of 2025, the provision in the Tax Cuts Jobs Act that increased the exclusion in 2017 will sunset. In 2026, it will go back down to the 2017 level of $5.49 million indexed for inflation.
We have a gift tax as well, and it is unified with the estate tax. As a result, the exclusion is a unified exclusion that applies to lifetime gifts and your estate. Between now and 2026, you could give tax-free gifts to take advantage of the exclusion while it is still at a record high level.
These are a couple of examples of the types of changes that can render portions of your existing estate plan obsolete.
Take Action Today!
We are here to help if you are ready to work with a Glastonbury or Westport, CT estate planning lawyer to adjust your existing plan. And of course, if you are ready to put your first plan in place, our doors are open.
You can send us a message to request a consultation appointment, and we can be reached by phone at 860-548-1000.
Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021.