3 Ways to Future-Proof Your Estate Plan

Planning for the future is essential for everyone. However, some things – like what the estate tax laws will be in 20 years – cannot be predicted. Thankfully there are a few simple ways to minimize your risks if certain events occur. These steps help ensure your assets are passed down according to your wishes and there is no confusion or ambiguity.

1. Make Successor Appointments

In your last will and testament, you will appoint a personal representative (or “executor”) who will handle your final affairs and ensure probate assets are properly distributed to beneficiaries. It is a great idea to appoint a successor executor to take their place if the original appointee predeceases you, does not have the capacity to serve as an executor, or declines to take on this responsibility for any reason.

Similarly, if you establish a trust, you should appoint a successor trustee to take over if the original trustee predeceases you, does not have the capacity to serve as trustee, or declines to take on this responsibility for any reason.

An executor or trustee may have developed serious health issues, moved away, or become unable to take on these responsibilities. Depending on your state’s laws, you can also put a process in place to replace a trustee or executor, or allow a trustee or executor to appoint a successor, if they are no longer able to perform their fiduciary duties.

If you have minor children, your will should name a guardian as well as a successor guardian for the same reasons – the original guardian has predeceased you, or is unavailable, unwilling, or unable to take on the role of guardian. If no successor guardian is named, or if both the original and successor appointees cannot serve, a court will need to decide the matter.

2. Include a Residuary Clause

A residuary clause serves as a catch-all in case there are estate assets not addressed in the will. Often property that is obtained after the will is executed, but before the testator dies, ends up being distributed according to the residuary clause. Testators may have simply forgotten to include certain property in their will, made a purchase after the will was executed, or received an inheritance and had not updated their will before their death. A residuary clause allows you to specify where such overlooked or additional assets should go.

For testators who leave their entire estate to one person, these situations do not generally cause a problem. However, some testators leave most of their estate to a particular family member, friend or charity and leave specific assets to other people. If you make specific gifts to one or more people in your will, you should name a residuary beneficiary. For example, a testator outlines that the vast majority of probate assets pass to their spouse, but that the testator’s rare coins and sports memorabilia go to one son, and antique car goes to another son. What if you purchased another antique car but hadn’t updated your will? What happens to a valuable painting you inherit from an aunt after your will is executed but before you pass away? What about something you forgot to put in the will? Without a residuary clause, it is unclear. In this situation, if the testator obtains assets after they have created a will but prior to their death and the will has no residuary clause, it is unclear who should inherit those assets. As a result, the assets will pass according to state intestacy laws.

State intestacy statutes tend to distribute starting with any spouse, children, parents, and onto family members of decreasing blood relation. This can lead unwanted outcomes. For example, where your closest living relatives are estranged or very irresponsible with money. There are many reasons you may not want your assets to be distributed according to intestacy laws.

Although you should update your will after purchasing or inheriting an asset, many people forget, assume their will has a fallback provision, or did not have adequate time before their death to update their will. It should be noted that the residuary estate can be left to multiple beneficiaries – for example to your grandchildren to share equally.

3. Name Alternate Beneficiaries

A potentially tricky situation arises when there is a specific bequest to a beneficiary who has predeceased the testator. Many states have anti-lapse statutes, which address this situation by mandating that the heirs of a predeceased beneficiary will inherit the property. In some states, an anti-lapse statute will only apply if the predeceased beneficiary is a close relative.

Where a predeceased beneficiary is a close family member and your state has an anti-lapse statute, it will normally apply. However, if you do not want the anti-lapse statute to apply, you can specify that the bequest go to an alternate beneficiary, or into the residuary estate.

By naming alternate (or “contingent”) beneficiaries in your will and specifying your desired outcome, you can avoid the application of an anti-lapse statute. Naming alternate beneficiaries can also be important for group beneficiaries. For example, if you have five grandchildren, but one of them predeceases you – are the assets distributed among the remaining four grandchildren, or is the predeceased grandchild’s share passed down to their heirs? In that scenario, you may decide that any bequest to a predeceased beneficiary should go into the residuary estate, rather than to the beneficiary’s heirs.There are many reasons you may not want a predeceased beneficiary’s heirs to inherit a bequest. Perhaps you have a strained relationship with them, believe they are irresponsible with money, or believe the assets could be more useful elsewhere.

On the other hand, if you make a specific bequest to a person who does not survive you – perhaps a close friend – and no anti-lapse statute applies, the property will fall into the residuary estate and be distributed accordingly. If there is no residuary clause in the will, the property will pass according to state intestacy laws. If the person who predeceases you was entitled to the residuary estate, the property is distributed according to intestacy laws, unless the residuary was shared with another beneficiary who is still alive.

Review Your Estate Plan Regularly

The only true way to future-proof your estate plan is to review and update it regularly with your attorney and tax professional. This is especially important after major life events, such as;

• Birth or adoption
• Serious illness or disability of your spouse
• Marriage or divorce
• Changes in tax laws
• Death of a beneficiary, guardian, executor, or trustee named in the will
• Receiving an inheritance
• Purchasing any type of property or large asset

Keeping your estate plan up-to-date helps ensure the smooth administration of your estate and that your assets are passed on according to your wishes. It is easy to overlook future-proofing techniques if you are preparing a will on your own, so it is best to consult an experienced estate planning attorney. To learn more about estate planning in Maryland and Florida, contact Bethany G. Shechtel, Esquire today.