Periodic review and updating of your estate plan is vital, for many important reasons, among which are the following:

Ensure that your trust is properly funded. Ensuring that your trust has been properly funded and that all your beneficiary designations are correct is perhaps the most important reason for updating your estate plan with your attorney. Without proper trust funding, all of the initial time and expense involved in establishing your estate plan will have been wasted, as a trust only operates correctly to avoid probate and minimize taxes if your assets continue to be properly titled and all beneficiary designations of IRAs, 401k plans and life insurance have been correctly worded.

Ensure that you avoid or minimize estate taxes. The current large federal estate tax exemption is scheduled to be cut in half at the end of next year, if not earlier, depending on the results of the federal elections this November. As a result, for married couples assets may need to be properly divided between the spouses, and beneficiary designations (including beneficiary designations under IRAs and 401Ik plans) may need to be properly prepared, to ensure that the couple will receive two estate tax exemptions, rather than just one. These tax issues are compounded if the couple resides in a state (such as Illinois) which has its own state estate or inheritance tax and a smaller exemption from their taxes than provided under federal law.

Ensure that income taxes on your IRAs and 401k plans are minimized. Last week the IRS issued final regulations on paying IRA and 401k plan benefits to trusts for a surviving spouse, children and more remote descendants after the account owner's passing. Although the final regulations are complex and subject to interpretation (as illustrated in this article I published this week), it is important that the account owner's trust document be reviewed in light of the same, in order to achieve 100% or more income tax deferral on the IRA and/or 401k plan proceeds after the account owner's passing. Achieving 100% or greater income tax deferral on IRA and/or 401k plan proceeds after the account owner's passing will obviously result in significant income tax benefits to the owner's family.

Ensure that your estate plan satisfies your current desires. As we all know, what made sense when our children were younger may not always make sense today. Situations (including financial situations) change as we age. Updating your estate plan allows you to take time to think about the various issues, and tweak your estate plan when it makes sense to do so. For example, ensuring that assets are protected in the event one of your children should divorce is normally a top priority among our clients with married children. Your desires may obviously also change if you have remarried since your original estate plan was established.

Ensure that your trustees and agents are up-to-date. Along the lines of the preceding heading, rethinking and revising trustees of trusts and agents under powers of attorney (both financial and health care) over time is typical. Your children may now be old enough to serve in these various positions and/or there may be other reasons for changing the individuals you have currently designated as your trustees and/or agents for financial or health care reasons. Similarly, there may be reasons to consider changing the individuals you have designated as legal guardians for your minor children.

Ensure that your assets are protected from lawsuits. Missouri law now affords married couples an opportunity to protect their assets from potential future creditors by drafting and funding their revocable trust agreement as a "Missouri qualified spousal trust." Because recoveries for serious automobile accidents are now in the $4 million and higher range, we highly recommend utilizing this technique if you are a married couple residing in Missouri.

Ensure that the large federal estate tax exemption is preserved. As discussed more fully in our June newsletter, individuals and couples with significant-sized estates should be exploring options to "grandfather" the current large federal estate and gift tax exemption. There are pros and cons associated with each option, some of which are addressed in this article I authored last week. The advantages and disadvantages of each option for preserving the existing federal estate tax exemption are discussed during our update meetings.

The Corporate Transparency Act

Another recent item of particular importance we wanted to alert you to with this e-newsletter is a new law (the Federal Corporate Transparency Act, or “CTA”) which applies to our clients who are owners (including beneficial owners through trusts) in limited liability companies (LLCs), partnerships, corporations which are not publicly-held, and other similar entities. The new law requires that the entity be registered with the Federal government, using the website FinCEN.gov, by December 31, 2024, or else face stiff financial penalties and/or potential jail time. To learn more about this new law, and to complete the registration process on your own, start by clicking on the lower left-hand corner of the first page of the FinCEN.gov website, “Beneficial Ownership Information: Learn About Reporting Requirements.” After clicking on this link, on the new page click again on the link in the lower left-hand corner, “Brochure Introduction to BOI Reporting.” Note that the entity is also required to update its CTA information in the future if there is any change in the beneficial ownership of the entity, which change may include a transfer to a trust.