Tax Law Changes Drive Need to Review Your Estate Plan


This week is Estate Planning Week all across the nation and we want everyone to know how important it is to have a properly drawn will and accompanying estate planning documents.
Gerard Kassouf, president of the Estate Planning Council of Birmingham, has this to say: “Estate planning is important to every person. Proper planning includes determining how assets will be distributed, and how debt will be paid. Other decisions such as the naming of a guardian and conservator for minor children, or providing for elderly parents, are part of the estate planning process.  Furthermore, if substantial net worth is involved, then the planning necessarily must deal with the federal estate tax and the federal and state income tax laws.   New tax laws provide another reason to review documents in place or to have documents prepared if none exist.”
If you have not reviewed your will within the past twenty-four months, then right now is the perfect time to get with your attorney or professional advisor. A few issues you’ll want to consider are:
·        Estate tax changes. Under the American Taxpayer Relief Act of 2012 (ATRA), you can leave an unlimited amount of assets to a spouse plus up to $5,250,000 of assets to a non-spouse such as a trust or directly to children. If you are married, you can each leave up to this amount to a non-spouse for a total of $10,500,000. Many wills written before ATRA provided that the ‘the maximum amount excluded from estate taxes’ go directly into a ‘family trust’ which in many cases benefited the surviving spouse but in some cases may exclude the surviving spouse assuming other assets would go to the surviving spouse either outright or in a marital trust.   With this new higher exemption, it means that for many families, one-hundred percent of the assets will go to the family trust, potentially leaving nothing for the surviving spouse outside of trust. 
·        Double check beneficiary designations and account ownership. We’ve read a number of cases where a divorced person fails to change his or her retirement plan beneficiary from his or her ex-spouse. We also reviewed a case where a husband died and had not removed the ex-wife from his joint checking account that had over $100,000 in it! You’ll also want to double check the beneficiary of any life and annuity policies you own. Remember, minor children (under age 19 in Alabama) should not be named direct beneficiaries of any assets. 
·        New laws regarding Power of Attorney (POA). Effective January of 2012, the State of Alabama adopted a new model Power of Attorney agreement which compels financial institutions to accept and follow its terms. POAs drawn prior to this change may or may not be accepted by various institutions. You’ll want a new one that complies with current law.
·        Is a trust needed? If you have minor children, your will should make provisions for holding your assets in a trust at least until the age of majority (age 19). In many cases, we find that young adults are not prepared to handle even relatively small amounts of money and are better served using a trust and trustee to help manage money until they have had time to experience ‘the real world’ for several years. Take a moment to add up the total value of your estate, including life insurance and see if you think your child would be ready to receive his or her share outright based on the age of distribution outlined by insurance lawyers in your current will.
Often, estate planning involves the teamwork of a number of professionals including attorneys, Certified Financial Planner™ professionals, CPA’s, trust officers and Chartered Life Underwriters. That’s because there needs to be a coordination of estate taxes, income taxes, multigenerational financial planning, life insurance planning and trust planning. It’s these combined efforts that typically create the most effective estate plans. The Estate Planning Council of Birmingham includes professionals across each of these disciplines. For more information, visit