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Incorporate estate planning into New Year’s resolutions

December 7, 2018
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As we enter the holiday season, many are focused on year-end giving. Whether it’s gifting to friends and family members or charitable organizations, it’s easy to get in the spirit of planning, purchasing and delivering.

Then, before we know it, it’s time to make our New Year’s resolutions. Often, we think of exercising more, eating healthier or getting better sleep, but what about a resolution that continues in the spirit of giving?

A resolution that ensures your wealth administration and estate planning are properly structured will greatly benefit you and your family. While it’s easy to become overwhelmed with resources that cover financial preparedness and giving, here are a few straightforward items to cross off your resolution list in 2019.

Revisit your estate plan: How has your current plan been affected by the 2018 tax law changes? Are your family’s assets structured to limit exposure to potential liability? Are your beneficiaries for life insurance and retirement plan assets updated? Your estate plan should be reviewed every three to five years and after major life changes. It’s also critical to ensure the formulas in your estate planning documents continue to accomplish your goals.

Develop or update your will (and sign it): When someone dies without a will, state law governs who will inherit that person’s estate. This may result in lawsuits from distant relatives and higher costs for loved ones since the process includes more court involvement. We have seen this several times with celebrities who didn’t have a signed will at the time of death — Aretha Franklin and Prince, for example.

A will or trust is critical because it directs how certain assets pass upon death, avoids a lengthy and costly probate process, can help to minimize estate taxes, specifies who will administer the assets and increases chances loved ones can avoid legal disputes or challenges. After it’s developed, make sure to sign it and share it with your family.

While you’re at it, make sure you also have so-called “disability documents” — a durable financial power of attorney and patient advocate designation (or a health care power of attorney).

Treat charitable giving differently: Instead of annual charitable giving that may no longer be useful as a deduction under new tax laws, consider contributing a large sum to a donor-advised fund, which allows you to receive an immediate charitable deduction and provide grants to several chosen charities over time. By using this type of fund, your money can be invested and grow tax-free before being donated.

Gift now: Don’t wait until December 2019 to make annual exclusion gifts. Instead, make them in January. You should focus on whether it makes sense to use some or all of your increased exemption from gift and generation-skipping transfer tax now, well before it decreases at the end of 2025.

Revisit your insurance coverage: Confirm you have enough coverage for your assets and that no major gaps exist. You should review your life insurance policies to ensure sufficient liquidity to pay estate taxes, satisfy buy/sell agreements and provide adequate funds for supporting your survivors. It’s also important to evaluate whether the policies you hold are performing as anticipated.

Specifically, you should request an inforce illustration from the carrier, which shows the performance of the policy from inception and includes future projections based upon current cash value and assumed interest rates (which are often different from the policy inception).

Review your business succession plans: If you are a business owner, it’s critical you give thought to what should happen to the business if anything happens to you. Each business is unique, and there is no one way to properly structure a succession plan. However, the earlier you begin planning, the better. Remember, succession planning is a process, not an event.

It may be challenging to identify a starting point for some of these items, but a quick call to your estate-planning attorney is a good first step in knocking these to-dos off of your list.

Laura A. Jeltema is senior counsel with Warner Norcross + Judd LLP who concentrates her practice on trust and estate administration and planning. She can be reached at ljeltema@wnj.com.

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