When you purchase a new car or build your dream home, you realize that the car will require maintenance and the home will require ongoing upkeep. Your estate plan also requires maintenance. If you only implement your plan once with your attorney and never maintain it, it will erode and eventually become outdated.
There are three estate plan maintenance issues to be concerned about: asset changes, law changes, and family changes.
Asset Changes
When you purchase a new piece of real estate, change banks or brokers, change jobs, or retire, your estate plan becomes outdated unless you are tracking the ownership title and beneficiaries and ensuring they are aligned with your overall estate plan. If accounts are not properly funded, titled, or otherwise aligned, your family could be hit with unnecessary taxes, the incorrect person receiving assets, or court involvement, even if you have the most elegantly prepared wills and trusts.
If you prepared an estate plan but never maintained it, years later when you want an update, before any advice or drafting can be done, your attorney will want to know what your estate consists of. You may then think, why wasn’t my estate attorney keeping track of this for me all along, isn’t that their job?
When a person passes away, the first thing needed for an estate administration is a list of all the assets and verification of how they are titled and beneficiary designations. If you failed to maintain this during your lifetime, your legacy may be of a person who planned but failed to maintain.
Law Changes
Every year new laws are enacted that affect estate planning.
- Federal Tax Changes
- In 2024, the federal estate tax exemption amount increased to $13.61 million per individual, up from $12.92 million in 2023. For married couples, the combined exemption is $27.22 million.
- The annual gift tax exclusion has increased to $18,000 per person.
- The Tax Cuts and Jobs Act (TCJA) provisions are scheduled to sunset at the end of 2025, potentially reducing the exemptions to approximately $5 million per individual, adjusted for inflation.
- SECURE Act of 2019
- This act impacts how children will be taxed on inherited retirement accounts, requiring most non-spousal beneficiaries to withdraw all funds within 10 years.
Family Changes
Family dynamics continually change: children become more mature, children marry, grandchildren are born, relationships change with those listed in important positions within your planning documents. Your documents may say something in them that was what you wanted five or ten years ago but is no longer prudent. If you fail to review these types of changes you may be leaving the wrong type of legacy.
Texas-Specific Considerations
- No State Estate Tax
- Texas does not impose a state estate or inheritance tax, simplifying the estate planning process compared to states that have such taxes.
- Community Property State
- Texas is a community property state, meaning that most property acquired during marriage is considered jointly owned by both spouses. This affects how assets are titled and how they pass upon death. A supplemental trust can be created to protect property that is inherited by one member of a married couple, which defines that the property in question is owned solely by that married individual.
The Best Definition of Estate Planning
“I will do whatever it takes to ensure that when I am gone, family harmony is realized, and the inheritance I leave protects, improves, and enhances the lives of my beneficiaries,” a quote from our firm’s good friend, Lew Dymond.
Estate planning shouldn’t be a burden. Spend a little time every year to maintain it, and it will never erode.
Regularly reviewing and updating your estate plan ensures it remains effective and aligned with your current wishes and circumstances. Consulting with an estate planning attorney can help you navigate changes in the law, family dynamics, and your assets, ensuring your plan is always up to date and effective.
