Annual Estate Planning Letter
Greetings from Alfano Law,
Welcome to 2024! We hope you and your family had a joyous and safe holiday season. Now that the hustle and bustle of the holiday season is behind us, we would like to provide our clients with some annual suggestions and updates related to estate planning.
Whether our firm assisted you with your estate planning, you completed your planning at another firm, or haven’t completed your estate planning yet, this letter should be useful to all recipients. We’ve divided the letter into four sections: updates in estate planning, suggestions for all estate planning clients, trust-based plan suggestions, and suggestions for clients with no planning.
Updates in Estate Planning
For calendar year 2024, both the Estate and Gift Tax Exemption and the Gift Tax Exclusion have increased from their 2023 levels.
The current Estate and Gift Tax Exemption amount for 2024 is $13.61 million, up from $12.92 million in 2023. What this means to you is each individual is allowed to pass after death, or gift during their lifetime, up to $13.61 million without the estate paying any federal estate and gift taxes. Federal rules allow married couples to combine their exemptions and pass or gift twice that amount as a couple.
Unfortunately, as the law is currently written, this large exemption will sunset in 2026, when it will revert to just over $5 million, adjusted for inflation, per person on January 1, 2026, unless Congress passes new legislation either extending or removing the sunset date.
The current Gift Tax Exclusion for 2024 is $18,000, up from $17,000 in 2023. What this means to you is that each individual is allowed to gift up to the exclusion amount to another individual without paying gift taxes OR reducing the Estate and Gift Tax Exemption. Thus, a married couple could effectively give $36,000 to each of their children, or any other individual, without any gift taxes. If the gift exceeds the exclusion, the amount exceeding the exclusion is deducted from your lifetime Estate and Gift Tax Exemption.
Suggestions for all Estate Planning Clients
Estate plans are much like a vehicle: a little routine maintenance from time to time can reduce or prevent issues later. Luckily, estate plan maintenance is generally an easy task. Here are some suggestions for everyone with an estate plan, whether it is just a will or a will and trust plan:
Look at your agents on your Advance Directive (health care) and your Durable General Power of Attorney. Make sure the agents you once named are your current selections. Additionally, if any named agents have passed away, now is the time to remove them and add an additional person. Consider having a generation between agents to reduce the likelihood of not having an agent if your Power of Attorney is activated.
Look at your executor(s) in your Will. Like the Advance Directive and Durable General Power of Attorney, make sure that the executor(s) you previously named are the those you would select today. Consider naming your children as they become older, if you feel they are capable of handling the responsibility.
If you have minor children, look at your Will to see who you named as Guardian(s) for your children. Is that selection still the same? Have you found someone more aligned with your values to raise your children should something happen to you?
Look at the dispositive provisions (the sections gifting items or money to others) in your Will or Trust. Have percentages changed? Perhaps a new child needs to be added. Additionally, have you acquired something since your last Will or Trust writing that you would like to go to a specific person? Have any beneficiaries since shown themselves to be irresponsible with money or suffering from an addiction? If so, additional safeguards can be put in place to allow them to receive an inheritance with additional oversight.
Look at your beneficiary designations with your life insurance, investment accounts, and retirement accounts. Make sure that the beneficiaries total 100%, and they are your current selections.
Suggestions for Clients with Trusts
In addition to the suggestions in the prior section, clients with trusts should consider a couple of additional maintenance areas:
Look at the section of your trust that discusses trustee succession. Much like the agents and executor(s) mentioned in the prior section, you will want to make sure the list of successor trustees is accurate. These are the people who will manage the trust when you cannot or when you pass away. A trustee is an important role, so consider this review carefully.
Make sure your trust is completely funded. Trusts can only manage and distribute assets that are the property of the trust. Funding a trust essentially means transferring the title of an asset from you individually to you as trustee of the trust. It is likely you did most, if not all, of this when you set up your trust, but sometimes the acquisition of a new asset after you created your trust can result in a funding oversight. If you pass away with an asset that didn’t make it into the trust, that asset is subject to the probate process to get it into the trust.
Suggestions for Clients without Estate Planning
If you are reading this letter and do not have any estate planning in place, don’t worry, you are in good company. Recent statistics indicate that approximately two-thirds of American adults have not completed any estate planning.
The important thing at this point is to reach out to an estate planning attorney at Alfano Law to discuss the benefits of estate planning and the consequences of not having a plan. We offer complimentary consultations for estate planning. During our consultation, we will provide an overview of our simple process, the benefits you will receive by completing your planning, and some peace of mind knowing that you are working toward protecting yourself, your family, and your hard-earned assets. If you would like to schedule a complimentary consultation, please contact us at (603) 856-8411.
All of us at Alfano Law wish you the best in 2024. If we can be of assistance with your estate planning needs, or you are interested in any of our legal services don’t hesitate to contact us.