When asked, many Washington, DC residents are able to say that they have an estate plan in place. However, if they are also asked when those documents were executed, some may say it was several years ago. Even though the documents may still be valid, four changes in estate planning laws could mean that they no longer achieve their intended goals.
A family's circumstances can change significantly from year to year. People get married or divorced, have children or even die. These reasons alone are enough to require periodic reviews of an estate plan. However, a review may also be needed if the plan was created before certain dates.
Any documents executed before April 14, 2003 may not include language required under HIPAA (the Health Insurance Portability and Accountability Act). Without this language an agent, trustee or executor may be unable to act on an individual's behalf. As of Jan. 1, 2005, the federal government stopped allowing a credit for state estate taxes. This means that estate taxes imposed on Washington, DC residents will be in addition to any federal estate tax owed.
On Dec. 17, 2010, the federal estate tax exemption rose to $5 million and adjusts each year for inflation. This exemption eliminated federal estate tax for a large number of people. Any will or trust created prior to that date may need to be updated in light of this generous exemption. For married couples with an estate larger than the $5.43 million exemption currently in place, any estate planning documents created before Jan. 2, 2013 may need updating. That was the date that the government instituted portability, which allows one spouse to carry over any unused portion of a deceased spouse's federal exemption.
This synopsis of these important changes may only touch the surface of how these laws effect estate planning. Between changes in the law and changes in a person's family, an estate plan can quickly become outdated. At the very least, a plan executed prior to these dates needs to be reviewed to ensure that it still meets the individual's goals.
Source: marketwatch.com, "Check the 'freshness date' on your will", Dan Prebish, June 16, 2015