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Did you know that nearly 40% of Americans make a New Year’s resolution each year? From those, resolutions focused on health and personal finances often top the list. With the New Year approaching and changes to estate and gift tax laws on the horizon, it is a strategic time to start connecting with your clients about a potential New Year’s resolution: updating their estate plan.

Your clients may not realize that the work is not complete once they create an estate plan. It is generally recommended that estate planning documents are reviewed and updated every five years – or sooner if there is a change to an individual’s personal and/or financial circumstances. Some examples include a change to marital status, the birth of a child or grandchild, change of state residency, or the disability or death of a family member. A review of an estate plan can also include a discussion of philanthropic goals; there are many ways for your clients to establish a legacy using their estate plan that they may not be aware of.

While every estate plan is unique to personal circumstances, these are five strategic tips to keep in mind when working with your clients to update their estate plans to ensure that their wishes are accurately reflected and that their plans will actually work as anticipated.

1. Appoint the right fiduciaries – When creating or updating an estate plan, it is essential that your clients have the right fiduciaries in place to help them. A fiduciary is a person to whom property and/or responsibility and authority are entrusted for the benefit of another. In estate planning, fiduciaries include executor(s), trustee(s), guardian(s), health care agents, and power-of-attorney agent(s). Having the right people appointed as fiduciaries is sometimes more important than the tax planning component of an estate plan. Each person named should have a complete understanding of the responsibilities they have signed on for and have agreed to serve. Your clients should review their fiduciaries routinely and check in to ensure they are still able and willing to serve in their role(s). At times, these roles can be challenging, time-consuming, and emotional. As much as your clients may be tempted to choose fiduciaries based on their personal relationships, fiduciaries should be chosen based on their qualifications and life circumstances. In other words, your clients should choose their fiduciaries with their heads and not their hearts.


2. Update beneficiaries – Planning for your future includes determining the distribution of your assets, and a common mistake with estate planning is forgetting to update beneficiaries. Your clients should regularly review and update their beneficiaries to make sure they are consistent with their current plan. A beneficiary designation is a legal form available for many financial accounts – including retirement plans, life insurance, bank accounts, and donor advised funds – that allows an individual to specify who should receive the remaining funds after their passing. A review of beneficiaries should ensure that all assets are in line with how your client has established their estate plan. For example, suppose that your client created an estate plan leaving everything to her spouse. However, an old 401K plan that she established when she was single still has her sister listed as the beneficiary. During the review of her estate plan, she should update the beneficiary to her spouse instead of her sister.
   
   Additionally, updating beneficiaries presents an opportunity for your clients to include charitable organizations in their legacy plans if they have philanthropic goals. Qualified nonprofit organizations can be named as a beneficiary for an account, and those assets may pass to the organization without any taxation. Accordingly, naming a charitable organization as a beneficiary is a very tax efficient manner for charitable giving!


3. Leverage annual gift tax exclusions – When crafting a thoughtful estate plan, it is important for your clients to be aware of the annual gift tax exclusions and how these can best be utilized. Individuals can give away a specific amount of assets or property each year gift tax-free. For 2024, the annual gift tax exclusion will be raised to $18,000, meaning a person can give up to $18,000 to as many people as they wish without having to pay any gift taxes. Individuals can also make unlimited gifts for health expenses, education expenses, or to a U.S. citizen spouse. Additionally, the annual gifts can be doubled by gift-splitting with their spouse. Paying tuition directly to the school for a grandchild, for example, is a great way to give an additional gift, without it affecting the client’s tax planning. Gifts to qualifying charities are not subject to gift tax limitations and do not affect the use of a client’s annual gift tax exclusion.


4. Be proactive about changes to the federal lifetime estate and gift tax exemption – One thing that is certain about tax estate laws is that they change. Beginning in January 2024, the amount an individual can transfer estate and gift tax-free, will be $13.61 million. This lifetime estate and gift tax exemption is scheduled to be cut in half January 1, 2026. It is estimated that at this time, this exemption will drop to around $6.2 million per person. What does this mean for your clients? First and foremost, the federal estate and gift taxes of 40% will be applied to property passing to the beneficiaries that is ultimately in excess of this amount (after any deductions). This is a significant difference to 2024’s exemption amount – meaning that your clients’ ability to save on federal estate and gift taxes will be greatly reduced. For clients who wish to pass assets to loved ones as part of their overall wealth transfer plan, gifting now, rather than later, could provide significant benefits. One estate planning strategy to prepare for the change is to set up a Spousal Lifetime Access Trust (SLAT) now and fund it later if preferred. Strategies will be unique for each client, but one thing is for sure – connecting with your clients about the change well in advance is essential. Clients who are interested in acting before this impeding change should get their planning done early before estate tax attorneys are fully booked and are no longer accepting new clients.


5. Consider the potential benefits of revocable trusts – Assessing your clients’ unique situation and needs may lead you to reconsider restructuring their estate plan in a revocable trust format. For example, New York was a state where wills were the most common format for estate plans. However, both the Covid-19 pandemic and the courts shifting towards electronic filing have now made the revocable trust the preferred estate planning format. First, since wills and probate petitions are public documents, companies are then able to mine and sell client data. Indeed, it is not uncommon for clients to find out that the court has processed their file by being solicited by real estate brokers wishing to sell the residence listed on the petition. Additionally, court backlogs have significantly grown due to the pandemic. Opting for a revocable trust ensures complete privacy, sparing your clients from the need to file any paperwork with the courts. Moreover, the flexibility of revocable trusts allows for quicker and easier changes to trustees compared to wills. For example, to change trustees of a testamentary trust, a petition must be filed with the court and could take many months to set a new trustee in place. In comparison, with a revocable trust it can only take a few weeks as it is handled privately.

From appointing the right fiduciaries, to reviewing and updating beneficiary forms, to being proactive about changes to the federal lifetime gift and estate tax exemption amount, all of these considerations ensure that your clients will be well-prepared for the evolving landscape of estate planning and starting 2024 on the right foot. Initiating these conversations with your clients now sets the stage for a proactive and strategic approach to estate planning, safeguarding your clients’ wealth, and ensuring that their wishes are faithfully and actually executed.

About the Author

Jill Miller

Jill Miller & Associates, P.C.

Jill Miller, the principal of Jill Miller & Associates, P.C., focuses on formulating sophisticated and highly personalized estate plans for individuals and families with the objectives of minimizing estate taxes and family discord. She also has a particular expertise in estate matters affecting non-US citizens and non-traditional families. Jill founded the firm in January of 2004, after working for over a decade in trusts and estates law.

Jill has maintained a personal connection with the ÌÇÐÄVlog for many years, actively working with the Professional Advisor Network and speaking at the ÌÇÐÄVlog’s annual Trusts and Estates Conference. Her daughter, Sarah, shared a passion and commitment for community health, working to get her entire seventh grade class CPR certified, playing an active role in the Wall Street Run & Heart Walk, and serving as a Red Cap Ambassador with the ÌÇÐÄVlog. Sarah’s legacy shines brightly today through hands-on CPR training in the communities that she was a part of. In honor of her daughter, Jill continues Sarah’s community health work, advocating for heart-safe offices that are equipped to handle cardiac emergencies effectively, saving more lives.

Jill is a fellow of the American College of Trust and Estate Counsel (“ACTEC”) and is a frequent lecturer on estate planning at both private and public symposia. She has presented or spoken at programs sponsored by the American Bar Association (Division of Taxation), ACTEC, the New York State Bar Association, the ÌÇÐÄVlog Conference on Estate Planning and Administration, and Philanthropic Planning Group of Greater New York. Jill is currently the Director of the Estate Planning Practicum and adjunct professor of Law at Cornell Law School and was an Adjunct Professor at Fordham Law School, teaching “Trusts and Estates” from 2005 to 2014. Jill is “AV Preeminent” Peer Review rated by Martindale-Hubbell and is named as a Super Lawyer.