Personal Finance

PERSONAL FINANCE: Non-tax reasons to revisit your estate plan now

The Build Back Better Act may eventually contain changes to the tax code that could profoundly impact estate planning.  While many such proposed changes in the original bill did not make it through the House, once the Senate acts on the bill and it goes back to the House, a contentious reconciliation process is likely.  The bill is a long way from becoming law, and changes to the tax code may end up in the final version.

Some people, especially the very wealthy with complex estates, have chosen to delay estate planning until there is greater tax certainty. For most of us, estate tax minimization is just one of many aspects of estate planning.  Here are some important non-tax aspects of estate planning that shouldn’t be delayed.


Disposition of assets upon death 

Your last will and testament (will) is the primary vehicle for designating how your assets will be distributed upon your passing.  (The use of a living or revocable trust with a “pour-over will” can be an alternative.)  The assets transferred can be financial, real estate or other items such as art and family heirlooms.  The assets that are controlled by your will can be transferred directly to named beneficiaries; transferred to an existing trust (an inter vivos trust); or transferred to a trust that will be created under the provisions of your will (a testamentary trust).  Trusts are very helpful when the intention is to distribute assets at a future date or under specific conditions.


Guardianship for children

When one has minor or disabled children, it is typical to name their potential guardian in your will.  Typically, the guardian will be the surviving spouse, but not always.  Provisions should be made to address circumstances where the surviving spouse may have pre-deceased you, or should you both die in a common accident.

Sometimes the choices of the guardians are obvious and noncontentious.  Sometimes, there are only poor choices or spouses can’t agree on potential guardians.  I’ve seen the estate planning process grind to a halt more often over a couple’s choice of guardians than over any other issue.


Administration of your estate

Upon death, the estate of the deceased is created as a function of law.  The person(s) or financial institution charged with managing the affairs of the estate is the executor (or co-executors).  They are tasked with accounting for your assets and liabilities, submitting the will to the courts to verify its legitimacy (this process is called probate), managing the assets under the control of the estate until they are distributed, distributing assets according to the provisions of the will, submitting tax and accounting filings to various authorities, and ultimately, when all assets are distributed and forms are filed, winding down the estate.  Depending on the size of the estate, the complexities of the assets and family dynamics, being an executor can be a tough and time consuming job.

Very often testamentary trusts will be created under the provisions of the will.  The fiduciary responsibility for these trusts falls upon the trustee(s) named in the will.  Sometimes the named trustee is the same as the executor, but not always.


Titling of assets

The titling of assets is of critical importance to the estate planning process.   Wills only control the disposition of assets that are part of the probate estate.  This means that there are assets that can pass to directly to a beneficiary and are not controlled by the dispositive provisions within the will.  Some examples of assets that are transferred outside one’s will are: life insurance proceeds when the policy names a beneficiary other than the estate of the decedent; financial accounts (including IRAs) naming a beneficiary; and real estate that is owned jointly where the survivor receives full ownership upon the decedent’s passing.  Often assets associated with one’s workplace, such as 401(k) plans and stock plans, also provide for the designation of beneficiaries, which supersedes any provisions within the decedent’s will.

Whether a decedent’s assets pass within or outside the provisions of the will is not an issue of good or bad – strong arguments can be made for both. The point is that the discussion of the titling of assets (especially when there is a revocable trust) is an extremely important aspect of the estate planning process.


Ancillary estate documents

Along with the writing of a will, and possibly related trusts, there are other important estate documents that generally are drawn up at the same time.  These documents include a health care directive, a health care proxy, a power of attorney and a HIPAA disclosure authorization.  These documents greatly facilitate the management of your care and financial life during periods of incapacitation, inform medical staff as to your intentions, and appoint others to act on your behalf.  These are important documents and very much part of the estate planning process.



Although my focus has been on non-tax aspects of estate planning, there are tax efficiencies that can be incorporated that likely will remain relevant regardless of any potential changes in the tax laws.  Certainly, consideration of state tax laws and gifting strategies should be incorporated into the estate planning process.  Regardless of future tax developments, meeting with your financial professionals to create or review your estate planning is always timely and provides a strong template should there be a need for tax modifications in the future.


The author does not provide tax, legal, financial or investment advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, financial and investment advisors before engaging in any transaction.

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