Reviewing Your Estate
IT'S ANOTHER NEW YEAR and if you’re like me, resolutions have slowly, or quickly, been broken. But here’s a resolution that you should keep.
As you prepare for the next year, think about making sure your legal and financial house is in order. If you were to have a serious accident or get ill, would there be someone to manage your affairs until you recover? Do you have a will that is 10, 15, 20 years old? Have things changed in your life – marriage, divorce, children, grandchildren? Have you retired recently? Moved to Edmonds from another state?
All of these situations can affect your estate plan. It doesn’t take a lot of time to pull out those estate documents and read them over to make sure they still do what you want. If you have an IRA, 401(k), life insurance, or other assets that pass automatically at your death, make sure that the beneficiary you named is still the one you want.
Another thing to look at is whether the estate documents you signed years ago are still necessary. Sometimes clients come to our office with trust documents that they created in the 1990s. Under these trusts, when the first spouse passes away, the trust requires the surviving spouse to divide the couple’s estate into a survivor’s portion and a decedent’s portion. The trust then requires the surviving spouse to place one half of all community property in an irrevocable trust. The intention of the trust was to protect the estate from federal taxes.
At the time these types of trust were established, estates of over $600,000 were subject to federal estate tax. As of 2015, the federal estate tax exemption amount has increased to $5,430,000. In addition, a decedent’s estate may elect to pass any of the decedent’s unused exemption to the surviving spouse. This means that, for a married couple, the total federal estate tax exemption amount is $10,860,000. Trusts like these, which were so popular back in the 1990s, are no longer practical for most couples.
If you are lucky and frugal enough to have an estate worth more than $2 million, the State of Washington may collect an estate tax after your death on the amount over $2 million. If you have assets worth more than $2 million or $5 million, you may want to work with an estate planning attorney to reduce the potential for taxation. If you don’t have assets worth more than $2 million, you may want to consider whether your trust from the 1990s still meets your needs and goals.
An attorney can help you review your documents and make any changes that might be appropriate or save your heirs money.
