Spring is in the air! So what does that mean? It’s time for spring cleaning; time to get rid of all the junk that accumulated over the past year; time to deep clean the house and freshen it up. It’s also time to clean up and update that old estate plan!
Remember that estate planning is a process—not a one-time event. After creating your will or trust, you need to periodically check-in with your estate planning attorney to make sure that it’s still up to date. Some of the main reasons why your estate plan might be out of date are:
- Laws Change. This is the biggest reason we need to make sure that your estate plan is always current. Depending on what your main concerns are, your estate plan, will, and trust might not need to be updated for years. On the other hand, laws can change at any time, and what you did last year, might already be obsolete!
- Your Family Circumstances Change. We often see clients who set up their estate plan naming their closest child who lives with them as their agent under their power of attorney and as trustee of their trust. Sometimes things change. The child moves away; their sibling moves in to help you instead; the child runs into financial difficulties; the child gets ill, passes away, or goes through a traumatic divorce. Any of these things can lead to a situation where that child might not be best suited to act on your behalf. It’s a good idea to update your plan to take into account these changes shortly after they happen.
- Your Wishes Change. Sometimes you just plain change your mind. The scary thing is how many clients we see who think they know what their will or trust says, and who are surprised to find out that it doesn’t actually say what they thought. Often clients will change their minds several times before coming to a decision in finalizing their initial estate plan. Sometimes, what they told their lawyer and signed in their documents isn’t what they remember a year later. Sometimes they plan on making a change with their lawyer that they never got around to actually doing, but mistakenly remember it as having been done. Recent science has shown how memories—even those that seem very vivid and clear—are often not factual. It’s a good practice to visit with your estate planning attorney every year just to be sure that everything is still in good order.
Some recent changes in the law over the past 5-10 years, that might affect your estate plan include: (i) Changes in estate tax exemptions and the introduction of “Portability” of estate tax exemption between spouses. If you have less than $5,490,000 and an A-B Trust (sometimes called a Marital Deduction, Bypass, or Credit Shelter Trust), there might be better planning options to make sure your heirs get a full “stepped-up” basis for capital gains tax purposes after you and your spouse pass away. (ii) Changes in Asset Protection laws. The State of Hawaii now allows married couples to hold property in trust as Tenants by the Entirety. This is a fantastic way to protect the home against a creditor of one spouse or the other (but not against creditors of both spouses) and still get the benefits that a trust can provide. Hawaii also has a Domestic Asset Protection Trust law now that lets you put assets into a trust, be the beneficiary, and shield those assets against your creditors. (iii) Changes in Medicaid Laws and Policy. Although the Medicaid laws haven’t changed substantially in the past few years, the policies that the State of Hawaii has adopted as their interpretation of those laws (sometimes in extremely absurd ways) has indeed changed. For example, the State is now attempting to recover on Medicaid liens placed against a Life Estate interest in a Medicaid recipient’s home if the Life Estate was created after September of 2013. Also, the State has asserted a position that ALL trusts—including irrevocable trusts—will be considered revocable for Hawaii Medicaid qualification purposes and therefore available resources for the creator of the trust, even if the creator is not a beneficiary of the trust. However, it is unclear whether the State will continue to assert this extremely unreasonable position or back off and take a more reasonable approach.
Regardless of the change in law that is relevant to you, the best way to stay up to date and protected is to regularly revisit your estate plan and revise it accordingly. To facilitate this process, Okura & Associates is now offering an annual maintenance plan for less than the cost of 2 billable hours of attorney time. If this interests you, please call our office for more information or to set up a free consultation to determine whether your estate plan needs any updates.
© OKURA & ASSOCIATES, 2017
Honolulu Office (808) 593-8885
Hilo Office (808) 935-3344
Ethan R. Okura received his Doctor of Jurisprudence Degree from Columbia University in 2002. He specializes in Estate Planning to protect assets from nursing home costs, probate, estate taxes, and creditors.
This written advice was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations governing tax practice.)
This column is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.