Start the New Year Right: Refresh Your Estate Plan

As the New Year approaches, millions of Americans set resolutions to improve their health, finances, and personal goals. However, one critical area often overlooked is estate planning. With changes to estate and gift tax laws on the horizon, now is the perfect time to encourage clients to include updating their estate plan in their resolutions. Estate planning is not a one-and-done activity; it requires regular review and updates to ensure it aligns with life changes and evolving laws.

Why Updating an Estate Plan is Essential

Life is full of changes, and an estate plan should reflect those. Experts recommend reviewing estate planning documents every five years or sooner if there are significant changes in personal or financial circumstances. Events such as marriage, divorce, the birth of a child or grandchild, a change in state residency, or the death of a family member all warrant an update. Additionally, a periodic review is an opportunity to explore philanthropic goals and establish a legacy through charitable giving.

Five Strategic Tips for Updating an Estate Plan

1. Appoint the Right Fiduciaries Selecting the right fiduciaries is critical. Fiduciaries—executors, trustees, guardians, healthcare agents, and power-of-attorney agents—should be chosen for their qualifications and ability to handle responsibilities, not solely based on personal relationships. Routine reviews ensure these appointees remain willing and capable of serving in their roles, avoiding potential conflicts or complications later.
2. Update Beneficiaries Assets such as retirement plans, life insurance policies, and bank accounts often have designated beneficiaries. Failing to update these designations can lead to unintended distributions. For instance, an outdated 401(k) naming a sibling instead of a spouse could contradict the client’s current wishes. Regular reviews ensure beneficiaries align with the overall estate plan and provide an opportunity to include charitable organizations as beneficiaries, offering tax-efficient options for philanthropic goals.
3. Leverage Annual Gift Tax Exclusions For 2024, the annual gift tax exclusion rises to $18,000 per individual. Clients can gift this amount to as many recipients as they wish, tax-free. Additional tax-free gifts can cover education or medical expenses if paid directly to the provider. By leveraging these exclusions, clients can reduce their taxable estate while supporting loved ones or charitable causes.
4. Plan for Changes to Federal Estate Tax Exemptions In 2024, the federal lifetime estate and gift tax exemption is $13.61 million per individual but is scheduled to decrease to approximately $6.2 million in 2026. Assets exceeding this exemption may face a 40% tax. Clients can benefit from gifting strategies now, such as setting up Spousal Lifetime Access Trusts (SLATs), to maximize the current exemption before it diminishes.
5. Consider Revocable Trusts Revocable trusts offer privacy, flexibility, and efficiency compared to wills. Unlike wills, which become public records during probate, revocable trusts keep clients’ affairs confidential. They also simplify updates to trustees and avoid court backlogs, making them an increasingly popular choice.

Proactive Planning for 2024 and Beyond

Starting the New Year with a refreshed estate plan ensures clients are prepared for life’s changes and evolving tax laws. From appointing the right fiduciaries to leveraging gift tax exclusions, each step safeguards wealth and ensures wishes are faithfully executed. Encouraging clients to act now sets the stage for a proactive and strategic approach to estate planning, creating peace of mind for years to come.

Schedule a free consultation with Lawvex today to review and update your estate plan. Let us help you start the New Year with confidence and clarity!