Estate Plan Check Up

11:25 am Consumer Articles, Estate Planning, Medicaid

Many people are in the habit of visiting their doctors for an annual physical or other regular check-up.  Still more visit their accountants each year to assist them with their income taxes.  And most people regularly visit their auto mechanics to change the oil in their cars every three months or so.

The practice with lawyers is different, however, and people may put themselves in peril if they do not periodically review their affairs with their attorney.

Occasionally, a client for whom I prepared estate planning documents 10 or 15 years ago will call on me to review their estate plan, but that is not typical.  Even less typical is a client who seeks a more frequent review of his estate plan.

Many changes have occurred in recent years, all of them likely affecting one’s estate plan to a greater or lesser degree.  Maryland’s Health Care Decisions Act of many years ago changed the list of situations in which one’s written end-of-life instructions would be applicable.  A “living will” created before this change in the law may not operate as intended in all of those situations.

The Federal privacy law known as HIPPAA has imposed restrictions on who can access your medical information.  If your medical power of attorney does not grant your agent access under HIPPAA, he or she will be locked out, potentially unable to obtain the information needed to assist you in making a decision if a medical crisis should arise.

Federal estate tax law has changed dramatically.  I still see wills and trusts which employ formula language that is outdated and may result in adverse unintended consequences for people who die in 2010 or later.

Maryland and D.C. estate tax law likewise has changed so that now it is not sufficient to rely on formula estate planning language based only on Federal law.  Before the recent changes, because the state and Federal estate tax systems were unified, such reliance was proper.  Now, unless your will or trust contains provisions that specifically address state law, after you die your estate may have to pay state estate tax that otherwise could have been avoided.

Are you still making gifts of $10,000 per year per person, having been advised by your attorney or accountant some years ago that this “annual exclusion” is the sheltered amount, the amount you may give to any one person without worrying about gift tax consequences?  The law has changed and you may now give larger gifts free of gift tax consequences.

Also, did you know that you can give more than the annual exclusion amount, up to one million dollars or more and still not pay any gift taxes?  Many people do not know this even though there are many estate planning and elder law strategies that will enable you to preserve assets for your family that are based upon this gift tax credit.

For example, making a large gift of assets may enable you to keep all of your assets available for your spouse, or to preserve your children’s inheritance, should you ever require nursing home care.  Often, the best time to do such planning is after one enters a nursing home, and you may have set up your estate plan intending for your agent under your power of attorney to take the necessary steps to shelter your resources.  Many powers of attorney prepared by estate planners who are not well versed in elder law, however, limit the power of your agent to make only annual exclusion gifts.  This may not be in your best interests, and a review of your power of attorney by a qualified elder law attorney would enable you to change your estate plan before you lose the ability to do so.

Medicaid law, too, has undergone radical changes.  While it is still possible to ensure that one’s spouse can keep all of the assets if one enters a nursing home, or to set up your affairs to shelter the assets you intend to pass on to your children after you die, it has become much harder to do so.  In some instances, it may be necessary to change your will, or to convert a revocable trust-based estate plan into a plan that relies on wills as your primary post-death estate planning vehicle.

While people are not in the habit of doing so, a regular review of your estate plan with your estate planning lawyer every few years would enable you to keep abreast of the changes in the law that may affect your plan and allow you to make any changes in your plan to ensure that it will operate as you intended in light of such changes.  Moreover, seeking the advice of an estate planner who is well versed in elder law would enable you to better plan for the future.

Making the small investment in such a regular legal check-up would ensure that you do not suffer a more costly consequence should your estate plan not take into account the current state of the law.