When is it Time to Service Your Estate Plan?


Volume 1 • Issue 2 • April 2011

The Counselor is a monthly newsletter of Hallock & Hallock dedicated to providing useful information on estate planning, business succession planning and charitable planning issues.  In this month's issue we will discuss when you should service your estate plan.  If you are interested in learning more about the ideas and processes discussed in this newsletter, please contact us for an initial consultation.

If you own a car, then you know it requires regular service in order to perform well and be reliable. Like your car, your estate plan needs "servicing" if it is going to perform the way you want when you need it. Your estate plan is a snapshot of you, your family, your assets and the tax laws in effect at the time it was created. All of these change over time, and so should your plan. The simple will written when you were a newlywed won’t be very effective now that you have a growing family, or are divorced from your spouse, or retired and have an ever-increasing swarm of grandchildren! Over the course of your lifetime, your estate plan will need check-ups, maintenance, tweaking, maybe even replacing.

Generally, any change in your personal, family, financial or health situation, or a change in the tax laws, could prompt a need for a change in your estate plan. The following events often trigger the need for a change:

  • Value of assets changes dramatically

  • Change in business interests

  • You buy real estate in another state

  • Birth or adoption

  • Marriage or divorce

  • Parent or relative becomes dependent on you

  • Minor becomes adult

  • Health declines

  • Disability

  • Family member dies

  • Federal or state tax laws change

  • You plan to move to a different state

  • Your successor trustee, guardian or administrator moves, becomes ill or dies

Another reason for regular review is funding. Many people have set up revocable living trusts to avoid the costs, delays and publicity of probate after they die. But all too often they do not title assets in the name of the trusts. Assets still titled in your name may have to go through probate - just what you were trying to avoid. So, how do you know when it's time to give your estate plan a check-up? Well, just like a car has regular mileage checkpoints, we recommend an annual review of your estate plan. This annual review will allow you to keep up with the various changes that will happen in life and maintain proper funding. One warning, if you see a needed change – make a note on a separate sheet of paper. Never write on your original plan documents. We look forward to seeing you soon for your annual review.


Think for a few moments about what would happen if you became incapacitated or died today. Would your spouse, family and successor trustees know what to do? Would they know where to find your estate planning and health care documents? Do they know who should be notified? Do they know what insurance you have and the benefits they can apply for? Do they know what assets you own and where they are located? Do they know who your attorney and accountant are? If you own a business, do they know what to do to keep it operating? Do they know whom to call if they need help?You don't have to tell your family everything about your assets right now. But it is very important that they know where to find this information when they need it. So, organize it and let someone know where to find it. The point is to try and make things as easy as you can for your loved ones.Give copies of your signed health care documents to your physician and designated agent. Keep the originals (titles, estate plan, health care documents) in one safe place like a fireproof safe or safe deposit box. (Be sure to add your successor trustee to your safe deposit box so he or she will have easy access.) You may also want to give a copy to your successor trustee; at the least, go over the main provisions with him or her.


You may want to consider giving some of your assets now to the people or organizations who will receive them after you die.Why? First, it can be very satisfying to see the results of your gifts - something you can't do if you hold onto everything until you die. Second, gifting is an excellent way to reduce estate taxes because you are reducing the size of your taxable estate. (Just make sure you don't give away any assets you may need later.) And third, it costs you less in the long run.One of the easiest ways to gift is through annual tax-free gifts. Each year, you can give up to $13,000 to as many people as you wish. If you are married, you and your spouse together can give $26,000 per recipient per year. (This amount is now tied to inflation and may increase every few years.) You can also give an unlimited amount for tuition and medical expenses if you make the gifts directly to the educational organization or health care provider. Charitable gifts are also unlimited.You do not have to give cash. In fact, appreciating assets are usually the best to give, because any future appreciation will also then be out of your estate. For example, if you want to give your son some land worth $52,000, you can give him a $13,000 "interest" in the property each year for four years. As long as the gift is within these limits, you don't have to report it to the IRS. Just the same, it's a good idea to get appraisals (especially for real estate) and document these gifts in case the IRS later tries to challenge the values. You should do this under the supervision of your attorney or tax advisor.

What if you want to give someone more than $13,000? You can, it just starts using up your $5 million federal gift tax exemption. If your gift exceeds the annual tax-free limit, you'll need to file an informational gift tax return for the year in which the gift is made. After you have used up your exemption, you'll have to pay a gift tax on any gifts over $13,000 (or whatever the annual tax-free amount is at that time).

Even though the gift and estate tax rates are the same, it costs you less to make the gift and pay the tax while you are living than it does to wait until after you die and have your estate pay the estate tax. That's because the amount you pay in gift tax is no longer in your taxable estate.

This Newsletter is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.