'Tis the Season To review your estate plan

Here's a New Year's Resolution that's easy to keep By Gina M. Barry, Esq. Associate, Bacon & Wilson, P.C. Special to PRIME The end of the year is fast approaching, and many people are making New Year's resolutions. A simple resolution that you should make this year is to review your estate plan. Annual review of your estate plan should be undertaken to ensure that your wishes have not changed, that your assets remain sufficient to carry out your plan, that the individuals you have named in key positions are still able and willing to serve, and that your documents are updated in accordance with the most recent law changes. Furthermore, any changes in the estate tax credit and the gift tax exclusion should be reviewed in January to plan for the upcoming year. Plan for estate tax changes Under the current law, the estate tax thresholds will change many times in the next several years. In 2005, an individual who dies may pass up to $950,000 to his or her heirs without incurring any Massachusetts estate tax. This same individual may pass up to $1.5 million to his or her heirs without incurring any federal estate tax. In 2006, the state threshold will increase to $1 million, and the federal threshold will increase to $2 million. The federal threshold will increase to $3.5 million in 2009. In 2010, and for only this year, the federal estate tax is repealed, which seems promising. Note well, however, that in 2011, the federal threshold returns to $1 million. The marriage 'benefit' When property is passed to a surviving spouse, even if it is greater in value than the current threshold, no estate tax will be incurred as the unlimited marital deduction allows "free" passage of assets from one spouse to the other. Be wary of the trap that awaits married couples in this provision. When the surviving spouse passes away, the assets will be in the estate of the second spouse and will be fully taxed at that time. If you are married and your combined estate is greater than the current exemption amount, proper planning can minimize the estate tax. Likewise, if you are single and your estate exceeds the current exemption, proper planning can minimize estate taxes. Does it still match your wishes? Even if the changes in the tax law will not necessarily affect your plan, you should review your estate planning documents each year to ensure that your wishes will be carried forth upon your incapacity, and ultimately, upon your death. Many times, when an individuals reviews his or her estate planning documents several years after the plan was initially drawn, the person find the documents no longer agree with his or her wishes. Here are some examples of situations that can inpact an estate plan: An additional child or grandchild has been born, and there are no provisions for this new family member. Children have matured significantly, and a trust is no longer necessary to hold and administer their inheritance. A child may have predeceased you or may have proven to be a spendthrift, in which case a trust may now be in order. Is the money still there? You will also want to review your estate plan to be sure that your assets remain sufficient to carry out your plan. In addition to other factors, a downward spiral in the stock market can take its toll on your estate plan. Many estate plans include bequests of specific dollar amounts with the remainder of the estate then passing to those intended as the primary beneficiaries of the bulk of the estate. If assets have decreased substantially, review any specific bequests to ensure that they are not so large as to effectively disinherit those who should receive the remainder of your estate after the specific bequests. Consider adding a clause to your Will that reduces specific bequests in the event that your estate has decreased to a certain level at the time of your death. Another alternative would be to change the dollar figures in your Will to percentages so that fluctuations in your assets will be adjusted for in your Will automatically. Will your executor still serve? Another reason to review your estate plan regularly is to make sure that the individuals you have named in key positions are still able and willing to serve. You should review the nominations in your Will, for example, your named executor and guardians, as well as in your Durable Power of Attorney and Health Care Proxy. You should also consider naming alternates in your documents, who would serve in the event that the person you named can not serve at the necessary time. If your Health Care Proxy does not contain Living Will language, which addresses your end of life medical decisions, your Health Care Proxy should be updated to include your wishes. Remember, times do change Many times, once an estate plan has been established, complacency sets in and the documents are not reviewed for many years. While some sense of security should follow the establishment of a plan, it is important to review your plan regularly for the reasons that have been discussed. 'Tis the season to review your estate plan make the resolution that is easy to keep. Gina M. Barry is an Associate with the law firm of Bacon & Wilson, P.C., Attorneys at Law. She is a member of the National Association of Elder Law Attorneys, the Estate Planning Council, and the Western Massachusetts Elder Care Professionals Association. She concentrates her practice in the areas of Estate and Asset Protection Planning, Probate Administration and Litigation, Guardianships, Conservatorships and Residential Real Estate. Gina may be reached at (413) 781-0560 or gbarry@bacon-wilson.com.