Why You Need to Update Your Estate Plan This Year

Written by Timothy Czekaj

Nearly half of all Americans don’t have an estate plan that fully encompasses all of their assets and beneficiaries, according to a 2020 Gallup poll.

Even people who have an estate plan rarely update it at critical times in their lives. It’s essential to keep your estate plan up to date and relevant so that your wishes are well known.

When & Why Should You Update Your Estate Plan?

There are several times in your life when you should update your estate plan. Updating your estate plan, including your will, trusts, and other key elements, is essential so your beneficiaries and the rest of your family know how you want your assets handled.

If You Don’t Have a Plan – Make One

If you don’t have one, create one as soon as possible. Everyone should have an estate plan. Even if you don’t think your assets are considerable enough to warrant a will and trusts, you need an estate plan to detail your wants and needs if you become incapacitated and after death.

You Experienced Life Changes

Common life changes warrant updating your estate plan. That includes all the following events and more:

• Marriage
• Divorce
• Birth or adoption of children
• Adding a family member
• Family changes
• Buying real estate
• Acquiring or selling significant assets
• Incurring debt that will impact your estate
• Receiving an inheritance

Revisit Your Plan Every Few Years

You should also revisit your estate plan periodically because of changes in laws, tax regulations, and your end-of-life goals.

Some key tax concepts you should consider when revising your estate plan in 2023 include:

Federal Gift and Estate Tax Exclusion Increase

The federal gift and estate tax exclusion amount has increased to $12,920,000 per person. Thus, you have additional gifting opportunities to individual beneficiaries if you had previously used your full lifetime exclusion amount.

Remember that this amount will decrease to $5,000,000 on January 1, 2026, when it is scheduled to be adjusted for inflation. If you don’t use the increase, you lose it. You should consider making additional gifts before 2026.

Federal Gift Tax Annual Exclusion Increase

Your annual gift tax exclusion amount has also increased to $17,000 per person or $34,000 per married couple. That’s an increase of $1,000 per recipient per calendar year. This applies without using any lifetime exclusion amounts or paying any gift tax.

Tax Rates for Estates and Trusts Are Unchanged

The highest federal tax rate for estates and gifts remains at 40%. The highest federal income tax rate for estates and non-grantor trusts is 37%. This applies to all taxable income over $14,450 earned in 2023.

Tax Portability for Estates Remains Unchanged

You can transfer a decedent’s unused federal estate tax exclusion amount to a surviving spouse through a federal estate tax return (called “portability”). This remains the same in 2023 as in previous years. However, there is a pending decrease in 2026, so exclusions should be made now.

Changes in Required Minimum Distributions

President Biden recently signed the Secure 2.0 Act into law, which addresses retirement plan contributions and administration. It increased the applicable age to start required minimum distributions. It also eliminated pre-death distributions from Roth accounts. There is also an increased amount of catch-up contributions allowed for some people beginning in 2025.

How to Update Your Estate Plan in 2023

To update your estate plan in 2023, you should contact an estate planning lawyer who can help you understand your best options. Some elements of your estate plan that you should consider with your attorney include:

• Power of attorney – Who will handle your legal, medical, and financial matters if you become incapacitated? A healthcare power of attorney can help.
• Living will – What are your end-of-life health care wishes? Do you want to go to a nursing home? You need to address all possibilities.
• Health proxy – Who will make health decisions if you can’t?
• HIPAA release – Designate an agent to discuss necessary healthcare information with medical professionals.
• Emergency child medical form – Determine who will make medical decisions for your child if you are unavailable.
• Will – Who are your beneficiaries? Establish guardians for your minor children and set up trusts to ensure they are cared for.
• Revocable trust – Minimize probate and place assets in a trust you can control.
• Beneficiary designations – Decide who will receive your retirement, life insurance, and other accounts.
• Deeds and other titles – Keep essential documents in your estate plan to ensure they are passed to the right beneficiary.
• Life insurance – Ensure you have enough insurance to cover the needs of your loved ones after you pass away.

An experienced attorney can help you develop a dynamic estate plan to address your needs. Additionally, they can help you understand tax implications for you and your beneficiaries.

Contact an Estate Planning Lawyer in 2023

You should establish or revisit your estate plan this year because of possible gaps for your dependents and changes in relevant laws. The estate planning lawyers at Czekaj Law, LLC have in-depth knowledge of new regulations and statutes, and they can help you achieve your end-of-life goals.

Call us today at 717-275-9770 or use our online contact form to reach out and schedule a consultation.