- Change in Family:
Any time there is a shakeup in your family make up—whether it be a death, birth, marriage or divorce—it is a good idea to review your estate planning documents.
Death/Birth. Whether named as a beneficiary, an Agent under Power of Attorney or Executor under your Will, when a loved one passes away it can create unintended consequences within your estate plan. Once you have worked your way through the grieving period, it is a good time to dust off your own estate planning documents and confirm you already planned for such situations by building in contingency plans. If you named a successor, however, you may still want to consider adding a new alternate now that your first choice is unavailable to ensure you always have at least one back-up in place for whatever changes come your way. Similarly, when you welcome a new child or grandchild to your family, you should confirm whether your Will uses broad enough language to encompass the new addition or whether updates are needed to ensure they are included.
Marriage/Divorce. In Pennsylvania, state law provides your spouse with a share of your estate should you forget to update your Will after marriage. However, you may wish to provide a different share to your spouse than what is provided by statute. Therefore, it is important to update your Will after a marriage to ensure your own wishes are carried out. The same is true upon a divorce. Pennsylvania law will generally remove any provisions in favor of your spouse once the grounds for divorce are established, but it may be best to put this in writing early to prevent any confusion or unintended consequences.
- Significant Change in Wealth
Changes in your economic position may also warrant adjustments to your estate plan. If you encounter financial hardship, for example, you may need to remove certain gifts altogether or convert them from a specific dollar amount to a percentage of the total value of your estate, in order to maintain the basic structure of your estate plan.
On the other hand, if you win the lottery or inherit a large sum, you may need to consider more complex planning, including the use of trusts to protect your wealth from the federal estate tax or to stagger distributions to your heirs in incremental amounts in lieu of one, large lump sum.
- Change in Health
Medicaid is a government benefit which can cover the cost of skilled nursing care. However, Medicaid is a means-tested benefit and has very specific, often complicated, rules when it comes to eligibility. Therefore, when a spouse or parent experiences a decline in health or reaches an advanced age, it can be prudent to meet with an attorney to discuss options for shielding assets from the high costs of skilled care before it is too late.
- Change in Law
Even after you get your Last Will and other estate planning documents in order, you will still need to keep an eye out for changes in law that may impact your plan or goals. Two key areas to consider, surround changes in tax law and retirement benefits as there have been numerous changes in these two areas of law in recent years.
One significant change to pay attention to is the combined lifetime federal estate and gift tax exemption, which currently sits at $12.92 million. While this means only the most affluent among us need to worry about advanced planning to avoid the steep 40% tax, in roughly two years (end of 2025), the exemption is set to drop to roughly $6 million per individual unless new legislation is introduced. As such, those who own more than $12.92 million or close to it, should consider the best ways to maximize their exemption and those with net worths floating near the $6 million mark may soon need to consider more complex planning schemes.