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Keeping Your Estate Plan Current

If you have a Will, think about when that Will was drafted. Five years ago, ten, twenty? Chances are your life has changed since that Will was made. Maybe you’ve gotten married, had a baby, experienced a death in the family, become a grandparent, retired, or seen a significant change in the worth of your assets. It is important to review your estate plan after these life events, to make sure that what made sense fifteen years ago still makes sense for you today.

Life Events

A well drafted Will should plan for events like the addition of children or the death of a named beneficiary. If your estate plan does not include after-born or adopted children, or make provisions for contingent beneficiaries, it is time to update the Will. Most Wills do not include the possibility of future marriage or divorce. In New Jersey, if your Will gives your estate to a parent or sibling, and then you marry, you must update your Will if you want your spouse to inherit your entire estate. Otherwise, upon your death your spouse will be entitled to only his or her “elective share” of your estate, which is currently one-third of the decedent spouse’s augmented estate. This amount is generally offset by the value of any assets which your spouse may own at the time of your death.

Matters are further complicated if you become divorced, or enter into a subsequent marriage, especially if you have children from a previous relationship. These life events almost always require a change in your estate plan. For example, in the case of a second marriage where both spouses have children from previous marriages, a typical estate plan may include setting up a “QTIP” trust. In this type of trust, the decedent’s estate is left to the surviving spouse in trust, and after the death of the surviving spouse, the principal and remaining income is typically left to the testator’s biological children. There are other trusts that may also work for your situation, and an experienced estate planning attorney can guide you through those choices.

Tax Planning

If you did not have significant assets when you made your estate plan, but since then have accumulated wealth, it is probably time to reevaluate whether your estate plan would benefit from tax planning. Although the majority of Americans’ estates will not be subject to federal estate tax ( $5,250,000 for a single person who dies in 2013), the exemption for New Jersey estate estate tax is only $675,000. If you own a house, life insurance, retirement accounts, and some savings, this can add up to $675,000 surprisingly quickly. There are many tax planning tools to help reduce your taxable estate, including disclaimer trusts, irrevocable life insurance trusts, and planned gifting, to name a few. These options should be discussed with an estate planning attorney, and when appropriate, a tax specialist.

Special Needs

If your current estate plan includes a gift to a person who now receives income-based federal assistance, such as social security disability benefits, you should know that the beneficiary’s inheritance may disqualify him or her from receipt of those federal benefits. “Supplemental needs trusts,” sometimes called “special needs trusts,” are designed to allow the beneficiary to receive the benefit of the inheritance while maintaining income qualification for federal assistance. The trust must be carefully drafted so that the beneficiary does not receive any cash from the trust. An experienced trust attorney can answer questions and guide you through this process.

In order to make sure your estate plan keeps up with your changing life, be sure to periodically pull out your old Will and read through it. If it doesn’t fit with where you are now, make an appointment with your estate planning attorney to discuss your estate planing goals and options on how to achieve them.

Melanie M. Levan is a shareholder with Posternock Apell, PC. She concentrates her practice in estate planning and administration, real estate, land use, and collections.