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Estate plan planning documents are like pieces furniture: everyone needs them and as you age, the pieces you collect tend grow in number and relative importance. An eighteen-year-old college freshman, for instance, might only own an Ikea bed and dresser set because that is all they require; likewise, their estate plan may only consist of a healthcare directive and durable financial power or attorney. A middle-aged adult with kids, on the other hand, will own enough furniture to fill a home and, similarly, a full suite of estate planning documents. A person approaching their twilight years, meanwhile, will have more furniture than they know what to do with and, if they have planned properly, more estate planning documents than they had earlier imagined needing.

The similarity between estate planning and furniture goes further than the fact that your collection of both grows with age, though. Another commonality is that every once in a while, both require an update. After all, furniture wears out or goes out of style and, in a sense, estate planning documents do the same. It could be, for instance, that five years ago you thought your ex-spouse’s name looked good on your will but now you think otherwise. Similarly, it may have been all the rage back in 2008 to make substantial gifts in order to qualify for the federal estate tax exemption but not as popular to do so in 2017 when the limit was raised.

The long and short of this comparison is that an estate plan is no more a one-time investment than a furniture set. Your need for both evolves over the years and with this evolution comes the need to revisit what you have.

When to Update Your Estate Plan
In general, it is wise to revise your plan every three to five years or any time a significant life event occurs. Such events might include the following:
1. A new marriage.
2. A divorce.
3. The death of a person named in your estate.
4. The arrival of a new child or grandchild.
5. Your assets or liabilities change.
6. You move to a new state.

Another time your estate plan requires updating is when a new administration takes office as change in government inevitably means change in federal estate planning law.

Changes Proposed by the Biden Administration

1. Lowering the Federal Estate Tax Exemption
Under President Trump, estates valued under $11.7 million were exempt from paying federal estate tax. The new administration has floated the idea of lowering this bar to $5 million or even $3.5 million. While most middle-income families will not be affected by this change, those with greater assets will and should therefore talk to their attorney about updates to their planning.

2. Eliminating the Step-Up in Cost Basis Rule
“Cost basis” refers to the amount originally paid for an asset and is the basis used to determine how much capital gains tax is owed on the asset should it appreciate in value. Under current legislation, when an asset is passed on through inheritance, its cost basis is stepped up to the current market value such that should a beneficiary sell the asset immediately, no capital gains tax need be paid. President Biden may eliminate this provision, a move which would affect everyone no matter their income bracket.

Detailing how best to respond the changes the new administration may implement or those life may throw your way is an individual matter. Each person’s family and financial situation is unique, after all.

Should you have questions about how you might best respond to changing legislation or changing life circumstances, do not hesitate to give our office a call at (256) 251-2137 or reach out to us via our website.