Tackling a review of your estate plan never seems to be top of mind. However, with the year coming to an end and as we spend more time with family, it makes a perfect time to review your end of life wishes. Planning for this moment can give your family members the peace of mind that everything is in place should something happen. Because your life is constantly changing, your estate plan will likely need changes over time as well. Below is a checklist of to-do items to review before the end of the year.
Find and Review Estate Planning Documents
- It is recommended that you review your estate planning documents at least every three years. Specifically, you should review who is listed as a potential executor, trustee, guardian, power of attorney, or healthcare agent. Be sure these people are still alive, have a good working relationship with the family, know about their responsibilities, and can handle the role. The executor should also know where a copy of the estate planning documents is kept.
- Each year, you should check to see if you opened any new accounts, either checking, savings, brokerage, or retirement accounts, to review the titling on those accounts. For checking, savings, and brokerage accounts, you can sometimes set up “transfer of death” designations, which will supersede a will and avoid probate on those assets. Retirement accounts require that you name a primary and contingent beneficiary.
- Always keep the most recent declaration page of your insurance policies in an easy to find location for your estate executor. Review the beneficiary designations to be sure they still meet your goals. For life insurance held inside an irrevocable life insurance trust (sometimes referred to as an “ILIT”), you will want to be sure those remain well funded each year and have the cash needed to pay the annual premiums.
- For those with revocable trusts, you might consider updating the schedule of assets inside your trust if you have purchased high value real estate, collector cars, horses, jewelry, or artwork during the year. In order to retitle tangible property into a trust, it can be as simple as drafting a trust amendment form with your estate attorney which keeps the original trust document active. It you have a joint trust with your spouse, you both must agree and sign off on any changes to the trust.
- You can make gifts of securities or cash to individuals up to $16,000 per beneficiary during 2022, and it will not be included in your “taxable gifts” during the year. Married individuals can each make use of the exemption amount to double the annual gift tax exclusion to $32,000 per beneficiary. Gifts made to 529 college savings or UTMA/UGMA accounts permanently remove the assets from your estate and avoid any potential estate tax if the assets remained in your own estate until death.
- The Tax Cuts and Jobs Act (TCJA) made significant changes to the estate, gift, and generation-skipping transfer (GST) tax exemptions. For 2022, the federal estate, gift and GST applicable exclusion amounts are $12.06 million. The maximum rate for federal estate, gift and GST taxes is 40%. For 2023, the federal estate, gift and GST applicable exclusion amounts will be $12.92 million. Absent any change by Congress, this higher exemption amount will sunset after December 31, 2025, with the laws currently scheduled to revert back to those that existed prior to the TCJA.
At Hollow Brook we help each of our clients integrate their estate plan into their long-term financial plan and investment strategy. While estate plans may change over time, we take a long term and holistic approach to managing multi-generational assets. This management style has allowed us to maximize the impact of our client’s dollars and see the value of their wealth multiplied over generations. If you have questions about how to better structure your estate, please reach out to us as we welcome the conversation.
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Disclaimer: Information provided is for educational purposes only. HBWM does not provide tax, legal, compliance, or accounting advice. In considering this material, you should discuss your individual circumstances with professionals in those areas before making any decisions. Further, HBWM makes no warranties with regard to such information, or a result obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.