A Legacy Review

Keeping your estate plan up-to-date is essential to ensuring that it reflects your goals and wishes

Keeping your estate plan up-to-date is essential to ensuring that it reflects your goals and wishes

Once you’ve developed an estate plan, it can be tempting to place it on a shelf and move to the next item on your to-do list. However, many factors that affect estate planning can change, requiring revisions so your plan continues to match your goals for distributing assets and minimizing taxes. Your family structure may change, for example: A beneficiary may pass away or, because of divorce, no longer be part of your family. State and federal laws governing estate planning also change from time to time, and the value of assets changes as well. Changes in tax law, your family’s structure or your net worth will impact your estate plan so that it may no longer reflect your wishes.

For all these reasons, it is essential to review your estate plan at least annually. Among the factors to consider are beneficiary designations and the titles of your assets, the status of any life insurance policies and any trusts that are part of the estate plan. It’s also important to think through the appropriate time to start discussions about the plan with your adult children.

Tackling these issues can be difficult. “It’s such an uncomfortable topic; nobody wants to talk about their own mortality,” says Elizabeth Winter, Senior Vice President and Wealth Advisor for Regions Private Wealth Management. “But if you continually put off your estate-plan review, you’re missing an opportunity to pass your assets the way you’d prefer.”

Here are some guidelines to get you started:

Beneficiary Designations and Asset Titles
Many experts recommend regularly reviewing the beneficiary designations on investment accounts and insurance policies, as well as the title of bank accounts and other assets. A major reason for reviewing beneficiary designations on a regular basis is to account for changes in your family, such as a marriage, divorce, birth or death. Assets such as retirement accounts, life insurance policies and IRAs are guided by beneficiary designations — not by your will. Therefore, it is wise to review those designations annually or when your family structure changes.

The concerns are similar when it comes to the title (the identification of the owner) of assets like bank accounts. The title determines how an asset or account gets passed along. If it’s titled “joint tenants with right of survivorship,” for example, it will pass to the joint owner. That title could create problems if it does not mesh with the overall estate plan.

“The beneficiary designations and titling of assets are critically important,” Winter says. It’s also helpful to maintain an easily accessible list of beneficiary designations and titles for your own records, she adds.

Life Insurance
Many individuals use life insurance trusts to keep the policies’ proceeds outside their taxable estates. While this is a valid estate-planning technique, “you’ve got to make sure you have an administrator who understands trust rules and follows them,” Winter says. Asking an expert to annually review your trust can ensure it complies with current tax law and will continue to accomplish your objectives.

It also makes sense to examine the value of the life insurance policies themselves. Coverage needs fluctuate during most individuals’ lives, rising when they start families, then perhaps moderating as their children become self-sufficient adults.

Furthermore, the dramatic jumps in the estate-tax exemption — which has risen from $1.5 million in 2005 to $5.43 million in 2015 — mean that some policies purchased within irrevocable trusts with the goal of limiting exposure to the federal estate tax and satisfying estate-tax liability may no longer be necessary, Winter says. One caveat: Some states’ exemption amounts differ from the federal ones.

Changes in estate-planning laws make it essential to periodically analyze any trusts. Winter provides an example: Many estate plans written years ago directed trustees to allocate enough assets to a family trust to match the exemption amount, with the remaining assets funding a marital trust. This strategy made sense when the federal estate-tax exemption amount was lower. As the exemption amount has increased, however, this structure may mean that few or no assets pass to the marital trust that benefits the surviving spouse. Depending on the structure of the family trust, a surviving spouse could be left without assets or an income source if the trust is not updated to account for estate-tax exemption changes.

Bringing Younger Generations into the Conversation
One of the most difficult estate-planning decisions is determining when to bring one’s adult children into any planning discussions. While the timing will vary for each family, opening the conversation reduces the likelihood that any actions the parents take will create discord among children when the parents are gone or inadvertently conflict with their children’s own estate plans.

The team of experts at Regions Private Wealth Management can help you craft an estate plan that reflects your wishes and has the flexibility needed to remain effective as circumstances change. Your Regions Wealth Advisor can help build a team of advisors to guide you through the estate-planning process and help you build the legacy you envision.

The Importance of Wealth Planning

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This information is general in nature and is provided for educational purposes only. Regions makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented. Information provided and statements made by employees of Regions should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Regions encourages you to consult a professional for advice applicable to your specific situation.