Updating Your Estate Plan

Many people are inclined to forget about their estate plans once they’ve signed the documents and filed them away. However, once you have an estate plan in place, it’s important to keep it up to date. You should review your estate plan every few years and any time there is a major event in your life, such as a divorce or a significant change in health.

Evaluating your estate plan every few years ensures that it will be updated when there are changes in the law. This includes your powers of attorney, which allow someone you elect to act as your agent if you are incapacitated or disabled and unable to make certain financial or health care decisions. A properly executed power of attorney can ensure that your wishes are followed and may help avoid conflict between family members. In Illinois, the statutory forms for both the health care power of attorney and property power of attorney have recently been modified. Even if you have existing powers of attorney, you should consider executing new documents using the most recent language. The property power of attorney was updated in 2011 to raise the standard of care for an agent, and effective January 1, 2015, the Illinois Power of Attorney Act also modified the power of attorney for health care. The amendments to the act included changes to the language describing the duties and responsibilities of the agent, as well as the descriptions for life-sustaining treatment options. The new form also indicates that the agent will act as the principal’s personal representative as defined under HIPAA, giving the agent access to medical records governed by HIPAA. Outdated powers of attorney that do not specifically include a reference to HIPAA may not allow the agent to have access to these records.

Estate planning strategies have also evolved in recent years in light of the greatly increased estate tax exemptions. The federal estate tax exemption is currently $5.45 million, while the Illinois estate tax exemption remains at $4 million. With the exemptions being so high, income tax planning has in some ways become more important than planning to avoid estate taxes. For example, incorporating a disclaimer trust is a tax efficient way to give a surviving spouse flexibility in determining which assets he or she would like to receive from the decedent. Additionally, before the exemptions were significantly increased, clients with large estates may have been advised to make gifts during their lifetimes to reduce their taxable estates. Now, the focus has shifted to taking advantage of the step-up in basis at death. For the majority of estates, paying estate taxes is no longer a concern and a more appropriate strategy is to maximize asset values at death.

We encourage you to reexamine your estate plan to be certain that it accurately represents your intentions and that it takes advantage of the recent changes in the law. An up-to-date estate plan will not only ensure that your wishes are respected, but will also lessen the burden on your surviving family.

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Di Monte & Lizak, LLC,

216 Higgins Road,

Park Ridge, IL 60068