by Salvatore M. Di Costanzo, Esq., and Joanna C. Feldman, Esq.
Regardless of whether your estate plan is basic or complex, it is important to review the plan every few years for reasons that include life events and changes in laws and/or regulations.
Estate plans can change drastically upon the occurrence of certain life events, which include, but certainly aren’t limited to:
- Marriage and divorce
- A new child or grandchild
- Death or incapacity of a nominated executor or appointed trustee
- Moving to another state, or even owning real property in another state
- Significant increases or decreases in the value of assets
- Illness, disability, or death of a spouse, child, or beneficiary
- Changes in family dynamics (for example, from functional to dysfunctional)
I’ve written previously about things to change if you are going through a divorce (e.g., changing the agent under your Power of Attorney). Once finalized, your ex-spouse will be ineligible from serving as the executor under your Last Will and Testament (“Will”), but that may leave only one remaining successor. If something happens to that person, be it death, disability, or an unwillingness to act, complications can arise. Or perhaps your distributive scheme needs modification because the inclusion of certain ex-family members no longer matches your wishes.
Your child may marry someone who, quite frankly, you don’t trust. Or maybe you realize your own child is incapable of managing finances. You may then wish to leave that child’s share to a trust set up for that child’s benefit, but to which they (and their spouse) have no access.
If your child gets divorced and your child’s ex-spouse is named as a beneficiary of your estate, their divorce may necessitate revising your documents.
Estate plans should be reviewed with the addition of a child or grandchild. A Will may be sufficient in that it simply provides that one’s estate shall be distributed to their spouse, or if the spouse predeceases, to their children (or their children’s children). In New York, however, because minor children may not personally receive property greater than $10,000.00, a guardian for the minor’s property may need to be appointed. This is an administrative – and possibly expensive – hassle that could be avoided if the Will provides for such property to be distributed to the trustee of an underage beneficiary trust established for the benefit of such minor child.
Owning a vacation home in another state solely in your name could lead to the need to probate in more than one state, which is another administrative – and possibly expensive – hassle that could have been avoided through the use of a trust.
Establishing residency in another state may render certain documents ineffective because they do not comply with the new state’s laws. Additionally, the new state’s estate tax system may be completely different, necessitating a completely different distributive scheme.
Finally, people consistently fail to update beneficiary designations following life events. I often encounter life insurance policies and other financial accounts where the beneficiary is someone who has predeceased, and no contingent beneficiaries are named.
Changes in laws and/or regulations may necessitate other changes
In New York, for example, the estate tax exemption is now over $5.7 million. The federal exemption is over $11 million (over $22 million for couples). These exemptions have increased significantly over time, and estate tax concerns that existed when an estate plan was crafted may no longer be concerns. The estate plan as crafted may include options for dealing with the estate tax concerns, such as using trusts, but if not needed anymore, the use of those trusts may create administrative burdens that could have been avoided by updating the estate plan.
Estate plans can and should change periodically. The failure to have an estate plan that reflects both current laws and your evolving personal situation may lead to the distribution of your assets in conflict with your goals and invoke other burdensome issues. Speaking with a knowledgeable elder law and estate planning attorney is the first line of defense against unintended consequences.
Salvatore M. Di Costanzo is a partner and Joanna C. Feldman is an attorney with the law firm Maker, Fragale & Di Costanzo, LLP, located in Rye and Yorktown Heights, New York. Their main area of practice is elder law and special needs planning, and they are frequent authors and lecturers on current elder law and special needs topics. Mr. Di Costanzo, who is also an accountant, is a member of the National Academy of Elder Law Attorneys, and has continually been selected each year by the rating service Super Lawyers as a New York Metro leading elder law attorney. Both Mr. Di Costanzo and Ms. Feldman are active in local and state-wide bar associations and practice-related committees. They may be reached at (914) 925-1010 or via e-mail at firstname.lastname@example.org or email@example.com. Visit the practice specific website at www.plantodayfortomorrow.com.