Estate planning attorneys and clients are once again awaiting possible sweeping changes in estate taxation. Will the cherished step-up in cost basis of capital assets go away? Will unrealized capital gains be recognized at death? What will the exclusion amounts be for federal estate tax? At the moment, answers are murky at best.
These are undoubtedly big changes being considered by Congress. But what can a client do in the meantime? The answer is simple: mind to the basic building blocks of your estate plan. The basics aren’t sexy. But they are crucial elements to your plan. This is the first in a series of articles which will examine the crucial but often overlooked decisions that make or break an estate plan.
What is the first essential building block of an estate plan? Is it the power of attorney? The last will? Maybe a trust? These are all good tools, but in the end, they are just ink on paper. Estate plans are not self-executing. We rely on people to carry them out. Your will may direct that a certain piece of property be given to so and so, but it takes a living, breathing person to secure, safeguard, account for, and physically deliver that property to the intended beneficiary. Thus, the selection and ongoing review of these critical players in your estate plan deserves careful consideration.
The challenge is that people and relationships change, often quickly. Our skills, temperaments, and relationships with others are constantly in flux. The person you entrusted five years ago to oversee your estate or serve as your power of attorney may now be unsuitable for a host of reasons that you could not have foreseen.
To address this, I recommend that my clients critically review their estate plan each year with a special focus on the people they’ve chosen to serve in these roles. I encourage them to ask themselves the following questions:
o Are the people I’ve appointed as my children’s guardian, my trustee, executor, or agents under my power of attorney still the best choices to ensure my wishes are carried out? Are any of them experiencing health issues, marriage problems, addiction issues, or other major life distractions that they were not experiencing when I first named them as a fiduciary? Do I still trust these individuals as I once did?
o What natural skills do each of these individuals exhibit? Who in my life exhibits the key characteristics of a fiduciary, namely trustworthiness, organization, and accountability?
o Do the people I’ve currently nominated to serve as fiduciaries reflect outdated or faulty notions? For example, did I nominate my son to be my Power of Attorney only because he lives in close proximity to me when another child of mine who lives far away might actually be better suited? Or, did I nominate my oldest daughter to serve as my Successor Trustee because I was afraid of hurting her feelings?
o Whom do I really trust to make personal medical decisions for me if I am incapacitated?
o Have I given enough consideration to the alternate fiduciaries who may be called upon if my first choice is unable to serve?
o What are my children’s relationships like with each other? Are they harmonious? Contentious? If I elevate one of my children to administer my estate at my death or be my primary medical decision maker, will it lead to unnecessary strife or litigation?
These can be messy questions indeed. Don’t breeze past the identification of the proper people to carry out your estate plan or protect you in the case of an incapacity. Talk with your attorney, review whom you have selected to fill these roles, and make appropriate changes as necessary. It’s worth a modest invoice from your attorney to ensure the people with the right skills and temperament are in place.
Please contact E|S trust and estate attorneys with questions on how to approach your own comprehensive estate plan to fit your needs.
