Most of us prepare a living trust, checking the box to indicate estate planning is done, and rarely or never revisit the trust. What a mistake!
Think of your estate plan as a life plan, a plan that takes care of you, your kids and your grandkids. Properly implemented, it can save the family home for the next generation. It can save the vacation home for the next generation. It can avoid punitive taxes.
Complacency is punishing. So, what should you think about each year or at least every second year?
• Changes in law that directly affect you. Last year, Proposition 19 became law. It severely punishes every family that wants to retain the residence, vacation home or rental property in the family. This is the perfect illustration of a brand-new development that requires proactive steps to address. Yes, we can avoid the problem and retain low property taxes for the generation – with good planning.
• Concern about your successor trustee. The person who will manage your trust if you become incapacitated or upon your death is extraordinarily important. That individual (or entity) will have responsibility for paying your bills and essentially taking care of you if you become incapacitated. After your death, that individual must be even-handed, committed and take all appropriate steps to be sure that terms of your trust are administered. This can be a big job.
Changing a successor trustee is perhaps the most typical trust update that our clients implement. It makes sense, because our thinking evolves and our own opinions about people in our lives change. A child named as successor trustee may disappoint us. A previously irresponsible child may have matured and stepped up. Above all, you must name a very responsible person in this role.
• Changes in health. More than 70% of individuals over the age of 65 will need some form of long-term care. This need may result from a fall, dementia or simple, healthy aging. The cost can be enormous. There are resources and government programs that can help pay the cost.
A diagnosis of a serious illness, terminal or not, also can generate the need for a significant change in your thinking and your planning. For example, you may want to protect assets and qualify for Medi-Cal to cover the cost of nursing home care. Remarkable, effective steps can be taken to achieve this goal.
You may want to be cared for at home, regardless of the cost.
• Exposure to the 40% estate tax that you did not expect. Yes, the current level of estate tax protection is extremely high at something in excess of $12 million per person. This is more than $24 million for a couple.
Be aware that on Jan. 1, 2026, the level of estate tax protection is cut approximately in half to something in excess of $6 million per person.
While the level of protection is still very high for a couple – more than $12 million – your estate may face exposure to this 40% tax given the current value of your estate and future growth in the value of your estate.
Keep in mind, for example, the “rule of 72,” which teaches that an investment earning a reasonable rate of return is likely to double every 10 years. This has proven to be roughly accurate for the growth in value of our homes. Most believe that the value of our homes will continue to increase in coming years.
Myriad, proactive steps can be taken to reduce the size of your taxable estate while preserving those assets for your children and grandchildren. Most sophisticated planning opportunities, parenthetically, are set forth in my book, “Beat Estate Tax Forever,” which is available from our office and on Amazon.
• Birth of a special-needs child or grandchild. If a new family member is on the autism spectrum, for example, a special-needs trust and related planning must be put into place. Many grandparents do this, as well as parents. This is a striking example of a significant family development that requires special, focused planning. Our book on this topic is “Special Needs Trust Creation and Management Guide.”
Think of it this way: You see your dentist and your doctor at least once a year for a checkup. You should see your estate planning attorney every year or at least every second year to make sure that your estate plan is as healthy as your gums and your body.
Michael Gilfix, Esq., is a partner at Gilfix & La Poll Associates in Palo Alto. For more information, call (650) 493-8070 or email MG@Gilfix.com.