Does Your Estate Plan Pass This Quick Checkup?

Is your estate plan out-of-date?  Below, is a quick checklist of some considerations to be made in determining the overall health of your basic estate plan:

  • Revocable Living Trust – Do you have a trust as your main estate planning document (as opposed to a will) to facilitate the efficient transfer of asset ownership at death?
  • Focus On Income Tax Planning – Does the format of your trust (or will) emphasize income tax basis planning rather than estate tax? Most estate plans already in place plan for the minimization of estate taxes, but with the federal exemption now over $5 million and being portable (can pass to a surviving spouse), document formats should be reviewed.  Income tax basis planning should be emphasized over estate tax exemption planning in the vast majority of cases.
  • Shield Children’s Inheritance from Divorce Claims – After both spouses pass, assets are often left in trust for their children. It is common for such children’s trusts to require distributions at certain ages.  Children run the risk of commingling distributions with their spouse thereby exposing the inheritance if divorce occurs.  To enhance protection of inherited assets, they can be kept in trusts that do not require distributions at certain ages.  The child may be given access to the trust assets, but they remain “non-marital” inside the trust and stand a greater chance of being protected in divorce. 
  • Beneficiary Designations May Be Out-of-Date – Beneficiary designations transfer ownership of the underlying asset. Usually, an account owner designates his or her spouse as primary beneficiary and children as contingent recipients.  Should your revocable living trust be the contingent beneficiary so that its distribution plan and protection of assets are made available, if need be?  Be sure that your revocable living trust has IRA and qualified plan language to take advantage of the income tax-friendly “stretch” rules. 
  • Powers of Attorney Need Attention! – Digital assets, such as passwords, usernames and internet accounts, are often overlooked in estate plans. Does your agent under your power of attorney have access to your accounts in the cloud?  Does your trust or will discuss disposition of those assets?  Does your power of attorney for property permit your agent to keep up your gifting plan?  Power of attorney language is becoming standardized by most states.  However, states often change the language and that requires such documents to be closely reviewed at least yearly.  Is your document more than a year old? 
  • Asset Ownership Often Must Change Along With Estate Plan Changes – the ownership registration of each asset must be reviewed to make sure it is consistent with the estate plan documentation and strategy. For example, clients will put an expensive estate plan together, but later add a daughter or son as a joint tenant on account so someone has access if “there is an emergency.”  A property power of attorney grants the desired emergency access, while adding a child’s name to an account can cause family conflict if the chosen child does not put the co-owned asset “back in the pot” when a parent dies.

Above, are just some of the items that warrant regular review.  Did you pass your estate plan exam with flying colors?


Michael C. Foltz, JD, CPA, CFP® is a BDF founding principal and founder of our Business Owner Team with an extensive background in law, tax and estate planning.  Mike shares his deep estate planning expertise by following the ever-changing federal and state estate tax laws and preparing education summaries for clients and team members.  Recognized by Chicago magazine as a Five Star Wealth Manager, Mike has given numerous presentations on estate planning to BDF clients and professional organizations such as the Exit Planning Institute. Publications such as Inc. magazine and the Wall Street Journal have featured his insights into estate planning, and he has contributed to an estate-planning publication for Commerce Clearing House.