It’s a new year and time for a little financial housekeeping – particularly after 2020 brought us so many surprises. 

Whether your finances or asset access needs have changed, you’ve been meaning to plan, or it’s been a long time since you thought about your estate plan, now is the time to review, update, or create your estate plan for the very first time.

Plan for Your Loved Ones with Life Insurance

An Irrevocable Life Insurance Trust (ILIT) allows you, the grantor, to pay into a trust whose proceeds will be distributed among the beneficiaries you designate. An ILIT is permanent – once you’ve paid into it, you can’t take the money out again – but it gives you more control than a will, especially if you’re making it with younger beneficiaries in mind.

Assets paid into the ILIT are no longer subject to your estate tax and are protected from creditors.

Learn about Revocable Grantor Trusts

With the election last fall, many folks hustled to update or create new trusts to preserve their wealth at current tax rates. Yet the extent of the political shift wasn’t known for sure until we got the results of the Georgia Senate run-offs in early January. 

Between the overload on tax advisors at the end of 2020 and not having the full picture until early 2021, many people haven’t made estate plans – and that’s okay. There’s a saying that the best time to plant a tree was twenty years ago – and the second-best time is now.

The same holds true with your estate plans. If they were a smart idea last month, they’re still a smart idea now.

In revocable grantor trusts, the person who created the trust is still effectively the asset owner and pays income and estate tax. These kinds of trusts get used because they reduce the beneficiaries’ tax burden. 

And they circumvent probate, the legal process of meting out a will. Probate can be emotionally painful, creating rifts in a family, and it isn’t private – it’s a matter of public record.

Look Over Old Documents

Many people want to think that the estate planning they did fifteen years ago – or was it twenty? –  doesn’t need to ever be revisited. But laws and preferences change. 

What made sense then may no longer make sense now. Don’t wait for a moment of high stress to rush back in and make changes. And make sure you actually understand the contents of your documents, too.

Update Your Power of Attorney and Medical Documents

Medical documents and powers of attorney (POA) are especially important to think about every few years. Who you choose to designate for POA and how you choose to do so can have a big impact. 

Spurred on by Hollywood movie plots, many people think that “springing powers of attorney” – where you have to be medically proven incapacitated before POA kicks in – are the way to go. But this approach can include delays, complications around patient privacy, and unexpected costs. In some instances, people who initially wanted this kind of extra step no longer feel it’s necessary – and would prefer that the person they trust for their POA no longer have to jump through these hoops in the event of a life-threatening situation. Or it may feel like a necessary safeguard.

Similarly, as medical technology changes, you may want to update your directive to physicians – the legal document that allows you to state your preferences for medical treatment.

Give Back with a Charitable Remainder Trust

The pandemic has forced us to reevaluate priorities – and left us with a renewed sense of appreciation for what we love. If there’s a local nonprofit or charity you’d like to support, you can do so and receive a tax break.

Charitable remainder trusts place tax-deductible donations into a trust that the donor (or their beneficiaries) can still receive some income from. Upon the donor’s death or the end of a specific period of time, the remaining assets go to the charity.

If you have questions about estate planning, contact us to schedule a consultation. Our experienced attorneys can guide you through the process.