Conventional wisdom states that you should revise your estate plan every three or so years or any time a major life event occurs. This is not only because as you age, your priorities change and your family evolves, but also because estate planning legislation is subject to revision and update—especially any time a new administration takes office.
The ongoing Covid-19 pandemic counts as a major life event and, naturally, a change in administration has just taken place. Both have triggered reasons to revise your planning and so even if you are among the millions of Americans who have invested in an estate plan in response to the events of the past year, now is a great time to review what you currently have in place.
What Changes Will the New Administration Bring?
1. Lowering of the Estate Tax Exemption
This change would affect only multi-million-dollar estates and yet we mention it for the sake of inclusiveness. For the 2020 tax year, estates worth under $11.58 million for individuals and $23.16 million for couples are exempt from federal estate taxes. President Biden has signaled that this could be more than halved to $5 million or even $3.5 million for individuals and $10 million or even $7 million for couples.
2. Elimination of the Stepped-Up Cost Basis upon Death
“Cost basis” refers to the base value used to determine whether capital gains tax is due on a particular item. Where real estate is concerned, the cost basis is the original amount paid for the property and under current legislation, this basis is stepped up to the property’s current value when passed on through inheritance. This means that if you sell inherited real estate immediately upon reception, you need not worry about capital gains tax. This could soon change, however, and should this happen, you will want to be ready.
What Additional Reasons Necessitate an Estate Plan Update?
3. A New Person Joins Your Family
Any time you welcome someone new into your family, be it a spouse, son- or daughter-in-law, child, or grandchild, you need to ensure this person is accounted for in your estate plan. Likewise, if you remarry and would like to include stepchildren in your plan, revisions are needed to make sure this is accomplished.
4. A Divorce Occurs
Just as new arrivals need to be accounted for by revisions, so too do fresh departures. If you have divorced since instituting your estate plan, you need to attend to updates immediately as a former spouse may make a claim as a beneficiary under an insurance policy, will, or trust.
5. A Beneficiary Passes Away
While the early loss of a loved one often brings blinding grief, it is important to not let this cloud the need for revisions. If a beneficiary passes, be sure to update documents to account for necessary redistributions or the inclusion of a new beneficiary.
6. You Inherit Assets
Any time your asset base changes it is important to speak to an estate planning attorney or financial advisor about your optimum new plan structure.
7. You Start a Business
Many folks are taking advantage of the Covid-19 pandemic to finally realize their entrepreneurial ambitions. If this is you, it is important that you speak to an estate planning attorney about a business succession plan. After all, such a document not only ensures your enterprise’s long-term survival but also provides valuable guidance in present decision making.
8. Years Have Passed Since Your Last Update
As stated above, the passage of time alone is a reason to update your estate plan. After all, changes in priorities have a funny way of going unnoticed and memory is a fickle thing. Even if nothing major has apparently happened in recent years, it is wise to review your current plan to ensure you still feel the same way on all matters.
Naturally, an experienced estate planning attorney is the best place to turn for a review of your estate plan. If the Covid-19 pandemic or new administration has you thinking that now is the time to do a review (as they should!), don’t hesitate to reach out to our office to get started. Give us a call at 216-341-3413 or contact us through our website for a free consultation.
Contact the Estate Planning Attorneys at Deliberato Law Center