Update Your Financial Plan Annually For Estate – Part 3

Friday, November 18, 2011, AM | Leave Comment

Life events keep changing. You get divorced, a designee dies, an addition to the family (birth or adoption), your financial status changes, estate and tax laws change. These are good reasons why you should review and update your financial plan annually regarding your estate plan. Also, if you become incapacitated (physically or mentally), you will have an updated estate plan. Remember, someone must take care of your personal, financial, and health needs.

So don’t neglect to review and update as needed your estate plan at least once a year. Procrastinating or totally ignoring is probably the biggest threat to an estate plan.

There are four big life events that impact estate plans:

  1. Marriage
  2. Divorce
  3. Birth or Adoption
  4. Death

You may also want to consider other factors that could affect your planning.

  • Heirs unable to pay taxes
    Often it just so happens that heirs are not able to pay the tax bill on your estate. In that case, you might want to look into setting up an irrevocable trust that removes your assets from your taxable estate.

  • Changes in Federal estate tax laws
    You should also consider the impact of changes in the federal estate tax law. Whenever there is a significant change in Federal estate tax laws, you should update the plan.

  • Exclusion increased
    As of January 1, 2011, the federal estate tax applicable exclusion has been raised to $5 million per person. However, the exclusions are scheduled to revert to $1 million per person in 2013. The probability is that Congress will let it expire. The legislative body may extend these provisions, but it’s uncertain it will do it. That’s another good reason why you need to carefully update your estate plan.

  • Under certain conditions, surviving spouses may now use any unused portion of this exclusion “ported” from their deceased partner. It will shield the surviving spouses’ estate from federal estate tax at the time of their death.

  • Federal gift tax
    The federal gift tax exclusion also has been raised to $5 million per person.

In a Nutshell
It is essential to have estate plan and update it frequently, at least once a year. Next we will discuss Update Your Financial Plan Annually For Retirement – Part 4.

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