Given the uncertainty surrounding estate planning legislation, not to mention the fact that the busy holiday season is now upon us, many clients may be reluctant to focus on their estate planning goals. I would argue that now is the perfect time to ensure that clients’ estate plans are in shape for whatever the future holds—and here are seven estate planning resolutions to help.
1) Make sure revocable trusts are funded
Clients execute revocable trusts to accomplish various planning goals, such as reducing federal or estate tax liability, protecting assets from creditors, providing for a family member with special needs, or controlling the timing and distribution of assets for beneficiaries. These trusts are also designed to preserve privacy and minimize estate administration expenses.
So what’s the problem? Clients often spend time and money executing a trust to suit their planning goals but then fail to complete the process by actually funding the trust. If a client’s trust has a provision related to a particular asset, the trust should own that asset. Assets not owned by the trust will not be subject to the trust’s provisions.
2) Update the estate plan when personal circumstances change
Often, problems arise when clients neglect to update their plans to reflect significant events, such as the birth of a child, marriage or divorce, or a new job. Such changes need to be reflected in estate planning documents to ensure that the documents keep pace with client goals.
3) Ensure that beneficiary designations are up to date
Outdated beneficiary designations can derail an estate plan. If a client has experienced life changes, such as a divorce, reviewing the beneficiary designation is important to ensure that assets will be inherited by the intended individual.
In addition, be sure to educate clients on the difference between probate assets, which are distributed to heirs through a court process (e.g., real property, bank accounts in the client’s name), and nonprobate assets, which bypass the court process and transfer directly to the heir (e.g., retirement accounts, life insurance listing someone other than the client as beneficiary).
4) Review asset ownership
Similar to beneficiary designations, asset ownership plays an important role in streamlining the client’s estate plan. If assets are jointly owned with survivorship rights, the asset will transfer to the surviving owner, outside of probate or a trust. If a trust is in place to accomplish specific goals, examine the ownership of assets to ensure that the client’s planning goals are met.
5) Ensure that revocable trust documents include retirement plan language