My clients often ask me how often to review or update estate planning documents. Updates often turn on changes that are happening to you. An unsteady, or ending marriage is a time to review both your documents and your beneficiary forms. The birth of a child, the marriage of a child, or other major life events are a good time to review things. A change in the health of yourself, your spouse, or your children may spark a need for advanced planning in the form of trusts, or it may require you to update medical proxy forms or re-think your living will. Once a child turns 18, he or she will need a health care proxy so that someone can step in and make medical decisions if there is an illness or accident. A significant inheritance or the illness of a parent may prompt adult children to re-visit an existing estate plan, or to put a new estate plan in place.
The end of 2012 is something of a special case for Estate Planning, however. Depending on what Congress does (or does not do) with the tax code at the end of this year, estate tax planning may suddenly become important for a large number of Massachusetts residents. Right now, the Federal Estate Tax exemption (the point at which you need to pay Federal Estate Taxes) is $5 million per person or $10 million per couple. If Congress does not act, this exemption amount reverts to $1 million on January1, 2013. So if you have a house worth $400,000 and retirement assets of $200,000 and a life insurance policy of $500,000, you also potentially leave your heirs a significant federal tax obligation. There is no way to know right now what will happen, but these changes may necessitate more tax planning than is currently in your documents.
Keep an eye on the news or call your estate planning attorney to help understand how the upcoming changes will impact your personal situation.