Whether they’re for self-improvement, career-oriented, or health-related, New Year’s resolutions can help set the tone for the next 365 days and beyond.
That’s why we recommend adding estate planning resolutions to your list. It’s never too early to determine how your estate and other assets will be distributed to your family and loved ones, especially with potential changes to estate tax laws under the incoming Biden administration.
Here are six important estate planning resolutions to make in 2021.
1. Draft a Will if you don’t already have one.
A valid Will is a document that directs, under the supervision of a probate court, how you want (and to whom you want) to distribute your property and financial assets when you die. Without one, you may open your family up to unnecessary expense and stress, and see your assets pass to persons (or ever your creditors) in a way you would never have wanted. In your Will, you should name a trusted executor (such as spouse, family member, close friend, or, in certain cases, an attorney or CPA), who is willing to be responsible for overseeing the management of your assets after your death.
2. Create a revocable living trust.
A revocable living trust is another estate planning tool that aids in the transfer of property. A revocable living trust can be adjusted at any time during your life and preserve certain assets for specific reasons important to you, such as keeping the family home for your children to continue to be raised in if both you and your spouse die. If you have minor children, a revocable living trust allows you to designate how their inheritance and finances will be managed until they reach an age (or set of ages) you feel most comfortable giving full control to them over their inheritance.
3. Update your powers of attorney, executor, and/or beneficiaries if any family circumstances have changed.
Ideally, the person(s) you name as attorney-in-fact under your powers of attorney and executor in your will is someone you trust to keep your best interests at heart. Unfortunately, your initial choices for these roles may not always remain the same.
A designated attorney-in-fact or executor should be changed in your estate plans if the chosen individual passes away before you, or if other recent circumstances (divorce, bankruptcy, a falling out, etc.) make you feel that they should not be involved in carrying out your final wishes. Be mindful not to appoint someone who could abuse this privilege for selfish reasons.
Similarly, you may want to review your list of beneficiaries to ensure that your selections reflect your current circumstances. For instance, if you are recently divorced, you should review your will and change anything that may be associated with your ex-spouse and their family.
4. Make sure you’ve appointed a legal guardian for any minor children.
No parent wants to think about what would happen if they pass away or become incapacitated while their child is still a minor. However, this is precisely why naming a legal guardian in your Will is so important.
Typically, if you die before the child turns 18, your child’s other parent becomes the legal guardian and assumes responsibility for that child’s care and well-being. If you both pass away (or if the other parent is not involved in your child’s life), naming a legal guardian or guardians in your Will ensures that important decisions about your child’s future are not left to a court or Department of Social Services.
5. Consider the potential tax implications of the Biden administration.
Under Biden’s presidency, there will likely be some new tax implications for estates. The incoming President plans to return to a reduced exclusion amount, which would subject a significantly increased number of estates to taxation.
Additionally, Biden proposed an elimination of the “stepped-up basis.” The current stepped-up basis allows assets to rise to the current market value before being passed on, so heirs can sell the inherited assets with minimal to no income tax. Under Biden’s proposed change, however, those who inherit assets (like a house) will have to pay increased capital gains taxes. You’ll want to keep these changes in mind when preparing or updating your estate planning documents.
6. Review your entire estate plan and consider whether you need to make any changes.
Your life circumstances can change a lot in a few short years, so be sure to review your entire estate plan and consider whether you need to make any changes, especially if you have not done so recently. When making these updates, ensure that all your retirement accounts, joint properties, life insurance, and beneficiary designations are recent.
Get help keeping your estate planning resolutions.
The best way to keep your 2021 estate planning resolutions is to work with a knowledgeable estate planning attorney. The Law Office of Patricia E. Tichenor, P.L.L.C. has 20 years of experience serving the needs of Virginia families, and we can help you with creating or updating your estate plans. Contact us today for a free consultation to learn more.