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The Importance of Recurrent Estate Plan Updates

[An estate case resulting in a dreaded family feud] underscores why clients should review their estate plans annually because tax laws change. Failing to do this might land families in court and entangle inheritances in litigation.

It is apparent that 2012 is a unique year for planning with the current estate tax and gifting laws. But as the years go by and laws change, are you paying attention to your estate plans and how they could be affected?  Such was the case back in 2010 when there was no estate tax, a very unique situation that some did not plan for.

It just goes to show that changing laws matter, and that your estate plans must change accordingly.

For fresh evidence of the necessity for annual visitation of the estate plan, and for the oddities of 2010, Financial Planner magazine recently published an article titled “Family Feud: Review Estate Plans Annually.” It’s the case of the family behind Magnolia Audio Visual, and the couple that sold its retail rights to Best Buy and accumulated a cool $100 million estate in the process. Unfortunately, the parents weren’t as savvy with their estate planning.

The estate plan provided that the maximum amount allowable under the federal estate tax threshold would be passed down to the children, with the rest to pass to the surviving spouse to thereby avoid immediate estate taxation. Unfortunately, the plan didn’t account for the fact that 2010 didn’t have an estate tax (thanks to expiring Bush-era laws and a gridlocked Congress).

The wife died. When the husband nevertheless claimed the estate that was to pass to the children under the estate tax planning, the children were noticeably irked. It seems they had been passed over and were in danger of losing a fortune afforded under the once-in-a-lifetime and quite unintended tax loophole. Accordingly, the children filed suit against their father on the grounds of “non-compliance, forgery and the use of undue influence.”

This case serves as a lesson to all that we should frequently update our estate plans to ensure our wishes are carried through to our loved ones.

You can learn more about  estate tax planning  on our website. Be sure to sign up for our complimentary e-newsletter to stay abreast of issues like these that could affect you, your loved ones and your estate planning. 

Reference: Financial Planning (September 1, 2012) “Family Feud: Review Estate Plans Annually

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