Start 2023 Prepared: Reassess What Matters Most

If we have learned anything these past few years, it’s that life is fleeting. Amid such uncertain times, many of us have realized what – and who – truly means the most to us.

Estate planning allows you to reflect on your family, your priorities, and what actions you can take now to secure your future and that of your loved ones.

With proper estate planning, you can find the thoughtful support you need to make choices that best suit your specific situation. Be prepared for this new year.

Start by asking yourself these three critical questions …

1. What Life Changes Have I Experienced Over The Last Few Years?

Significant life changes are a good reason to assess if prior estate planning documents you have in place need to be updated.

Alternatively, if you have recently come into assets or inheritance and never had an estate plan, now is the time to put one in place. Consider the following examples.

• Seeing the final paperwork may have brought a sense of relief if you have gone through a divorce. But what if you have advance directives or a will that put your ex-spouse in charge of your affairs? While it is true that they may no longer have a claim on your assets, you may have appointed them as the person who should make medical decisions for you or who would be in charge of your estate. Is this still what you want?For many people, the answer is no. If that is your answer, these documents should be updated, whether a will, health care proxy, power of attorney, or other directives.
• Suppose one of your parents has recently passed away. You may now be the owner of new property or be in receipt of insurance proceeds, savings, or other funds. If something happens to you, what would you like to happen to these assets?If you do not have a will, speaking with an estate planner is an excellent idea to ensure heirs of your choice benefit, instead of leaving the decision up to your state’s default rules.

Many more life changes warrant evaluating whether an estate plan is right for you. Second marriages, the birth of a new child, or simply a change in heart as to who and what matters the most are all valid reasons to take a closer look at your current plan (or lack of a plan).

2. Has a Spouse Recently Passed Away?

The death of a loved one or spouse is one of life’s hardest moments. Although reflecting on their passing is very difficult, not doing so may adversely affect any inheritance you wish to leave to loved ones.

This is because of a concept called federal tax portability. Looking into whether portability may benefit you is especially important if your spouse passed away in the past five years. For example, if your spouse passed away in 2020 and only used $2 million of their $11.58 million estate and gift tax exclusion, you may be able to transfer an additional $9.58 million in exclusions to your future estate.

This can make a massive difference for your heirs and prevent them from owing taxes to the IRS. This is especially so, considering the current federal estate and gift tax exclusions are set to expire on December 31, 2025. At that time, they are slated to go down 50 percent, to 2017 levels, as adjusted for inflation. So even if you do not pass away until after 2026, you may be able to add millions in tax exclusions, which will benefit your heirs.

You must follow specific procedures to elect the “portability” of your spouse’s unused gift and estate tax exemption, subject to some exceptions. If this is an option for you, it could result in hundreds of thousands of dollars in tax savings.

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3. What Happens If I Become Incapacitated?

Another important matter to reflect on is what happens if you cannot make decisions for yourself. Instead of leaving your loved ones with the inability to act or an expensive court process to get the authority to act, you can execute a few simple documents now.

These documents are generally referred to as advance directives, but the terminology varies from state to state. They typically encompass three areas: power to act on your behalf to make medical decisions, power to act on your behalf to manage your personal affairs, and access to information.

Many people with adult children are nearing a point in their life where they may need someone to look out for them. Having effective documents in place can make it less likely you are taken advantage of by others when you are in a vulnerable state. It also makes it more likely that those who know you best can communicate your wishes and manage your care, should the need arise.

• A power of attorney can give a trusted child power to help you manage your bills, help you apply for Medicaid, help you downsize your home, and much more.
• A health care proxy can tell doctors and hospitals who you want to make medical decisions for you.
• A HIPPA authorization can allow your children to remain equally informed about your health and ask medical doctors questions about your situation.
• Finally, a living will set forth what you would like to happen if a recovery is not possible.

A good way to look at the estate planning options discussed here is that they allow you to take control of the future and, once these decisions are made, put these worries behind you. The start of the year 2023 is a great time to sit down with your estate planner and review your options.