The Law Has Changed. Have Your Estate Plan Documents Kept Up?

If you had a trust and related estate plan documents prepared more than a few years ago, you should consider having them reviewed and updated if necessary.

You should consider the persons you have designated to take care of your children if something happens to you and your spouse and make sure they are still your choice.  You should consider the persons you have appointed to make health care decisions for you and make sure that they are still able to serve, and that their contact information on your Advance Health Care Directive is correct.   You should also make sure that all of your assets are titled in your trust and that the beneficiary designations on accounts such as IRAs and life insurance are still correct. 

Even if none of those things need to be changed, the law has, and your documents may need to be changed to reflect the new laws.   Most family estate plans created prior to 2012 contained a “bypass” or “A-B” trust that requires the estate to be divided into two or more subtrusts after the death of the first spouse.  Due to changes in the law, this division may not be necessary, and is potentially burdensome and unnecessary for the surviving spouse.  It requires a separation of your property into two or more parts, and then a tax return for the “bypass” trust every year for the life of the survivor.  If property is sold, it needs to be divided into separate accounts for the “bypass.”

The purpose of these subtrusts was to minimize estate taxes by effectively doubling the size of the estate that is not subject to tax.  Two things have changed: first, Congress created  the concept of “portability,” which allows the surviving spouse to use the unused exemption of the deceased spouse, and second, the exemption amount has changed from one million dollars in 2000, to 11 million dollars, per spouse, as of 2018. This means that unless the estate is more than $22 million, there will be no estate tax, and no bypass or A-B trust is needed.  These limits will go down in 2025, or earlier if Congress changes the law. 

I have had several clients come to me after their spouse has died who have found the two trusts to be burdensome.  We have to get the court to change the trust to reflect the different circumstances, or get all of the beneficiaries to agree.   We can do this, but it is much easier if we fix the documents while both spouses are alive.

There is no charge to review your existing documents and discuss whether changes are needed.