Estate Plan Revise? 5 Key Questions | Lord Abbett
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Practice Management

Clients' Estate Plans need to be revised periodically. Here are five key questions advisors should consider. 

This Practice Management article is intended for financial advisors only (registered representatives of broker dealers or associated persons of Registered Investment Advisors).

When working with clients, I explain that an estate plan is a reflection of the present state of their lives, coupled with an overlay of applicable laws. As time progresses, a client’s family circumstances, as well as those applicable laws, will likely change -- and as a result, the plan will need to be updated.

Is it time for your clients to reassess their estate plans? Advisors should consider the following five questions:

1. How much time has passed?
Look at when the documents were signed. As a rule of thumb, I tell clients to review their documents approximately every five years. In my experience, I have yet to review an estate plan older than 10 years that did not need fairly extensive changes.

Over the past several years, there have been major changes in federal estate tax laws, as well as many state estate tax laws, which can make plans work inefficiently. In addition, many states (such as Massachusetts) have adopted new probate or trust laws relatively recently, such as the Uniform Probate Code or the Uniform Trust Code.

While the adoption of these new laws may not render an existing plan inoperable, it can result in increased costs and/or unintended consequences. For example, a woman came to me after her husband died, asking me to administer the estate. The husband's trust was more than 10 years old and no longer worked properly when taking into account Massachusetts estate taxes. Ultimately, we had to go to court to reform the trust in order to avoid the imposition of more than $100,000 in Massachusetts estate taxes. She could have avoided the cost and hassle if the trust had been updated prior to her husband’s death.

2. Where's the real estate? 
The purchase of real estate in a state other than a client's state of residence should always trigger a review of the estate plan. First, it is important to consider how the real estate will be owned, in order to avoid an ancillary probate in the second state. It is also necessary to consider whether the new state has an estate tax that should be taken into account.

Currently, I'm administering an estate of a Massachusetts decedent who owned a relatively inexpensive timeshare in California (in the form of a deed in the decedent's sole name). As a result, we have begun probate in both Massachusetts andCalifornia -- and the additional expenses almost equal the value of the timeshare.

3. Who's in charge?
Among the most important decisions people make in their estate plans are who they name as their personal representative (i.e., executor) of their estate and trustee of their trust. Naming the wrong person can increase costs, delay the estate administration or, in the worst-case scenario, result in assets being stolen or diverted.

Check to see whether those persons named in the plan years ago still make sense. Take into account whether people have moved or become sick, if relationships have soured, or if cognitive capacity has changed as people aged.

I find that the single most frequent reason clients call me to update their estate plan involves concerns regarding individuals named in the plan: If circumstances have changed recently, it may be time to consider a new executor, trustee or both.

4. Has the client moved? 
A relocation across state lines should always cause a review of the estate plan. Even though a validly executed will or durable power of attorney in one state is a valid document in another state, the document may not work properly in the new state.

For example: Durable powers of attorney have different execution requirements from state to state -- and certain powers, such as the power to gift, may require certain disclosures or procedures. One rather contentious estate I was involved in last year involved a Massachusetts resident who died with a New Jersey will, which gave the executor all statutory powers under New Jersey laws. But the two states have different rules: Massachusetts law does not grant a statutory power to sell real estate, while New Jersey does; and two Massachusetts title examiners involved with the estate had differing opinions regarding whether a Massachusetts executor has the power to sell real estate without a license from the court under the New Jersey statute.

This issue resulted in extra fees and a delay in the sale of real estate, which could have been avoided if the will had been updated after the move to Massachusetts.

5. Big life changes?
Has the client undergone any major life changes since the estate plan was signed? Two of the most obvious changes that could affect an estate plan are marriage and divorce. Many state laws will revoke portions (or all) of an estate plan upon either event. Clients are routinely surprised to learn that their wills may no longer be valid if they have married since the last one was signed.

Other important life changes to ask your client about are:

  • Have any children have been born, or become adults?
  • Have any children received a diagnosis that may leave them unable to support themselves?
  • Have the client’s personal fortunes changed?
  • Has a business has been bought or sold?

These are all important reasons to relook at the estate plan in order to determine whether changes are necessary.

Estate planning attorney Tracy Craig is partner at Mirick O'Connell and chairwoman of the firm’s trusts and estates group. Follow her on Twitter at @TracyACraig.


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