All of our thoughts turn to family during the Holiday season even more than the rest of the year.  That makes this a great time to consider whether the Estate Plan you have for your family is still “up to code.”

No “inspector” will drop by unannounced to see if your Estate Plan remains up to date.  So, each apartment owner must take responsibility for him/her self to keep your Estate Plan current. 

In this article, I will give you a few tips to help you know when you should have your Estate Plan reviewed and/or revised.  And, this kind of “code” checkup will probably not hurt near as much as having a visit from the building code inspector. 

The reasons owners update or review their Estate Plans usually fall within one or more of the following five categories:

  1. Get a refresher to better understand how your Estate Plan Works
  2. Changes in the law, particularly tax law
  3. Changes in your family situation
  4. Changes in your wealth
  5. Changes in your goals for how your wealth should pass and be used

    The remainder of this article will expand a little on each of these categories which might motivate a review and/or update of your Estate Plan.

    REASON #1 – Get a Refresher Course on How Your Plan Really Works

    In our experience working with property owners, we find very few of them really understand how the elements of their Estate Plan actually work.

    Sometimes we think that lack of understanding resulted from the failure of a prior lawyer to fully explain how the elements would work, or why they should work that way.  We frequently find clients whose prior lawyer never fully explained to them the choices they could make in their planning.  Other times, the Estate Plan may have been explained, but, with the passage of time, the property owner just does not remember how the plan works.

    Either way, you and your heirs deserve a plan that is customized to meet your goals.  If you do not understand it, the odds are that it will not meet your goals well.

    REASON # 2 – Changes in the Law Since You Last Revised Your Estate Plan

    When “The American Taxpayer Relief Act of 2012” (“ATRA”) became effective in 2013, estate planning for most apartment owners turned upside down.

    ATRA and California tax changes increased estate tax exemptions, made “portability” permanent so you could leave your exemption to your spouse, reduced estate tax rates and increased in income tax rates.  The result of these changes  made old A-B (or A-C-C) trust planning (which was implemented in most Estate Plans done before 2013) actually HAZARDOUS to the family wealth of most apartment owners by reducing the ability to get maximum step-ups in basis after death.

    If your Estate Plan was not drafted with these changes in mind, you should review it with an attorney who understands the planning issues of apartment owners and the ways to maximize tax benefits under current law.

    The fact remains that Estate Taxes, and to a large extent, income taxes, are “voluntary” under our legal system.  With good planning, they can often be reduced, or even eliminated.

     

    REASON #3 – Changes in Your Family Situation

    A well-drafted living trust adapts to most changes in your family situation.  Still, if there has been a divorce, the birth or adoption of new children and grandchildren, a marriage or even a major change in the situation or maturity of your heirs, it pays to consider whether those changes would make you want to change your Estate Plan.

    REASON #4 – Changes in Your Wealth

    Appreciation in real estate has been a great thing for California apartment owners.  However, as a result, many now have much more wealth than they ever anticipated.  in some cases, that poses new tax problems that such owners may want to address in their Estate Plans.

    In other cases, that newfound wealth presents planning opportunities never seriously considered before.

    Either way, it suggests that owners reconsider whether or not their current Estate Plans remain suitable.

    REASON #5 – Changes in Your Goals

    As you get older and wiser, your goals for how your wealth should be used may change.

    Perhaps you have realized that one or more of your children (or grandchildren) will have more, or less, need for a pro rata share of your wealth than the others.  Or, maybe one them has demonstrated a lack of skill or judgment in managing money that suggests you put some controls in place to protect the wealth you leave behind.

    Maybe the combination of your children’s’ success and your desire to do good means you want to devote some of your wealth to philanthropy.   Perhaps you fear that this much wealth would infect them with “affluenza,” robbing your children of the motivation and satisfaction of making something of themselves.

    And, in some cases, your income or estate tax burden has grown to the level that carefully planned philanthropy will enable you to pursue philanthropic goals at little or no cost to your heirs, while saving a lot of income taxes during your life.

    Whenever your goals or your wealth change significantly, you should re-address your Estate Plan.  A good estate planning attorney will help you to articulate YOUR goals for your wealth, and then evaluate strategies that might help you achieve them.

    “IF YOU FAIL TO PLAN WELL, PLAN TO FAIL”

    Every family needs good Estate Planning.  And, as we age, our financial and family situation changes, along with our goals.

    You should not view Estate Planning as a one-time event, but as a dynamic process.  Your wealth and your family are too important to let yourself be stuck with out of date planning that is no longer “UP TO CODE.”

    The Holiday Season can be a great time to re-evaluate your planning, and maybe even get your adult children involved.  Some of the most satisfying planning we do often involves do planning sessions with parents and adult children (sometimes even adult grandchildren) to help our clients refine and meet family goals.

    Kenneth Ziskin, an estate planning attorney, focuses on integrated planning for apartment owners.  He holds the coveted AV Preeminent peer reviewed rating for Ethical Standards and Legal Ability from Martindale-Hubbell.  Ken lectures frequently to AOA members and recently rewrote AOA’s Special Report “Holding Title to Your Property –A Matter of Life, Death and Taxes”. Ken’s website is www.Family-Wealth-Strategies.com   Ken offers free consultations for AOA members and can be reached at (818) 988-0949

    This article is general in nature and not intended as advice for clients.  Please get advice from counsel you retain for your own planning.