July 2020

The MLO Minute: By Lesley Mehalick, J.D., LL.M., Supervising Partner of Trusts and Estates, and Dennis McAndrews, Esq., Founder

Many terms are being used to describe the current health crisis in America and across the world. All of us have our own words to describe what is occurring in our individual lives. One phrase recently used to describe the effects of the pandemic is that many of us become victims of “paralysis by analysis”, such that we become unable to make important decisions and procrastinate necessary actions. As the famed football coach George Allen frequently told his players: “The future is now.” The same is true in estate planning and the relevant issues that confront each of us today. Let’s look at some of these estate planning issues that every one of us should consider today, especially during these turbulent times, to determine whether our estate plans should be modified.

1. Change in personal life or financial status. Has there been a death, marriage, divorce, birth, adoption, or other major change in the family structure? Has some significant financial change occurred such as an inheritance, move from another state for a new job, increase in available stock options, receipt of life insurance proceeds from a deceased family member, or favorable resolution of litigation, among other factors?
2. Beneficiary designations. Whenever we develop an estate plan for a client, we discuss the existence of financial instruments such as life insurance, retirement plans, annuities, etc. as these financial resources pass upon death by way of the beneficiary designation, and not under the will.  It is essential that these designations match the current intention of the holder of these instruments, and it is particularly critical to review these designations when there has been a death, divorce, marriage, or other significant change in family circumstances.
3. Retirement. With the current pandemic and the resulting restrictions in the economy, many individuals have taken retirement packages earlier than otherwise anticipated. Retirement is a life change that generally requires reevaluation of an estate plan, and is particularly important with respect to funds in retirement plans, many of which were established years ago and the legal requirements of the plan may have changed in manners unknown to the client.
4. Change of beneficiaries, executor, or guardian of minors. It is not unusual for circumstances to occur which require us to add, subtract, or modify these individuals within an estate plan. New beneficiaries may be born or others may die or become disabled. An executor/executrix may move from the area or no longer be a close friend or relative. We have seen numerous circumstances where close friends have vacationed together with their children, but that vacation disclosed very different parenting styles which causes a client to ask us to quietly change the guardian of their minor children to another family member or friend. Similar considerations exist in the designation of a holder of a power of attorney or a surrogate medical decision-maker under a living will. These are all circumstances which can occur in any of our lives, and when they do, a review and modification of an estate plan is particularly important.
5. Property named in your will has been sold. In some circumstances, a will divides property by specifically distributing real estate, collections, or financial instruments such as particular stocks. If any of these types of property are no longer owned, it can dramatically disturb the intended division of an estate among beneficiaries and result in an inequitable and unintended division of property at death.
6. Changes in applicable law. Wills that were created a decade ago, and even more recently, often include provisions for a Credit Shelter Trust which was designed to avoid Federal Estate Tax. In recent years, the federal exemption has risen dramatically so that an individual can leave over $11 million, and a couple can leave over $23 million to beneficiaries without incurring the very steep Federal Estate Tax. If a Credit Shelter Trust is still included in a will, in many circumstances it is no longer necessary and can result in unintended consequences by tying up funds unnecessarily for the surviving spouse. In the majority of cases we handle where a prior will included a Credit Shelter Trust, the removal of that trust in a revised estate plan serves the client very well. Similar considerations now exist for Life Insurance Trusts which have been created prior to changes in the current tax law.

Please look to our website for articles related to many of these topics, and if you would like us to assist you in developing or revising your estate plan, we look forward to working with you. Contact us today by CLICKING HERE or calling 610-648-9300.