Life is riddled with unknowns. While you can control certain events like whether you’ll have kids or tie the knot, other milestones are not as easy to predict. Life comes at your fast, and sudden, unexpected events can muddle with estate planning. For this reason, make sure your plan is flexible.
You’re able (and it’s recommended) to update your estate plan as you age. But when you die, the plan is more or less set in stone. To curb some of the unknowns that will inevitably arise, it’s a good idea to incorporate milestones into your estate plan. Milestones trigger predetermined decisions that allow you to exercise your wishes and pass wealth to loved ones after you are gone.
If-then statements are pre-made decisions that are carried out based on conditions you set. They are commonly seen in legal documentation, including estate plans.
The concept of if-then statements is straightforward. If a certain criteria is met, then a given action is put into motion. Take the following for example: “If my spouse and I both pass away before our children are fit to care for themselves, [Relative X] will be nominated as their rightful guardian."
Clauses like these can reserve some of the power you have over otherwise unforeseen circumstances. They also offer more flexibility than more simplistic declarative statements (“I leave the property in The Hamptons to my oldest daughter”, for example).
If-then statements can build upon one another to account for various future scenarios. So you could say, “If my spouse and I both pass away before our children are fit to care for themselves, [Relative X] will be nominated as their rightful guardian. If [Relative X] is unfit to care for our children, [Friend A] will assume the nomination.”
The beauty of conditional actions in your estate plan is that they can take on many forms. Aside from if-then statements, you can also include asset allocations or gifts that are put into motion when certain milestones are reached.
Check out these events that are commonly incorporated to trigger gifts or distributions to loved ones:
These milestones are just the tip of the iceberg, and can be combined or modified. For instance, you may give wedding money to a child while storing the rest of their inheritance within a trust. This ensures that if they get divorced, the assets you pass on won’t fall into the hands of their ex-spouse.
You can also set up your estate plan to allocate more money to an individual if the value of that asset increases over time. Remember that if-then statements can be used to make such allocations flexible. The possibilities are endless.
It's a complicated process to populate your estate plan with if-then statements and other milestones. But the work you do up front will protect you and your loved ones from the unknowns of the future.
The professional estate planners at Anderson, Dorn & Rader will help to put all your wishes in writing. To simplify the proceedings, we can spell out your conditional statements with flow charts and diagrams. These can then be integrated into your estate plan to provide clarity after you’re gone.
Whether you’re looking to update an existing life plan, or start from scratch, our estate planning lawyers can help. Contact Anderson, Dorn & Rader to secure your plans for the future and continue your legacy after you’re gone.
As estate planning lawyers, all too often we speak with people that are looking for “damage control.” They find themselves in difficult circumstances because they did not plan ahead in advance appropriately. Of course, we do everything that we can to provide assistance after the fact, but most often there is only so much that can be accomplished.
They say that the only certainties of life are death and taxes, and everybody prepares for April 15th each year. Strangely enough, the majority of adults have made no preparations at all when it comes to this other certainty. Granted, we know that tax day will come along every year, and most people go forward with the belief that the Grim Reaper is not going to pay them a visit anytime soon.
Yet, you never know what the future holds, and people of all ages pass away each and every day. Estate planning is one of the basic, core responsibilities of adulthood, and everyone should have a plan in place. And when you have a partner or spouse and/or children depending on you, the importance of planning is amplified exponentially.
Since so many people go through life without any estate planning for an extended period of time, when they finally take action, they breathe a sigh relief once and for all. The documents are placed in a drawer or a lockbox somewhere, and these individuals go forward with the idea that the matter is closed.
In fact, estate planning should be viewed as an ongoing process. There are many different things that can take place in your own life that can trigger the need for estate plan updates. One of them would be additions to your family, and of course, subtractions could also render your existing estate plan obsolete. If you get divorced, you are certainly going to want to change your beneficiary designations and adjust other elements of your existing estate plan.
Speaking of marital status changes, if you decide to get remarried after getting divorced, your estate plan will need another round of revisions. One situation that can occur is the desire to protect the interests of your new spouse as you simultaneously preserve inheritances that you want to leave to your children from a previous marriage. This type of situation can be addressed through the utilization of a qualified terminable interest property trust (QTIP).
When you establish this type of trust, your spouse would be the life beneficiary, and your children would be the final beneficiaries. If you die before your spouse, he or she would be able to receive income from the earnings of the trust and live in a home has been conveyed into it. However, your surviving spouse would not be able to change the terms of the trust when it comes to the final beneficiaries. Your children would inherit the assets that remain in the trust after the death of your surviving spouse.
Improvements in your financial status over the years and/or changes to relevant tax legislation can also create circumstances that lead to the need for estate plan revisions. In fact, we just experienced a change that is very relevant to the estate planning community. As of 2018, the federal estate tax exemption is $11.2 million. This is the amount that can be transferred before the estate tax and its 40 percent rate is applied to your estate. Prior to the enactment of the tax legislation, the federal estate tax exemption was $5.49 million. Clearly, this is a very significant difference, and changes like these should definitely be discussed with your estate planning attorney if you are a high net worth individual.
As you can see, there are many things to take into consideration as the years pass, and you should certainly go forward in a fully informed manner. With this in mind, we have scheduled a number of informative Webinars over the coming weeks. You can obtain some very useful knowledge if you attend the session that fits into your schedule, and these Webinars are being offered free of charge. To register, visit our Webinar schedule page, find the date that works for you, and follow the simple instructions.