Estate Plan Maintenance Washington State

by David Meyer on October 15, 2010

It is important to periodically review your estate plan in order to be sure your assets are distributed as you truly desire and to avoid tax traps. Your estate plan can be changed inadvertently through changes in investments, growth in net value or other common changes in your life or the lives of your beneficiaries without you being aware of it.

The following are some circumstances which can inadvertently have an effect upon your estate plan:

Divorce/dissolution or legal separation of Marriage:

If you are recently divorced or legally separated, you typically want to be sure that your former spouse does not continue to be your primary beneficiary.  For example, Washington law provides that upon dissolution of the marriage any beneficiary designation to the spouse is revoked as a matter of law. However, the United States Supreme Court has held that this statute does not apply to employment benefits. Thus beneficiary designations to the ex-spouse on 401K plans and other employment retirement plans as well as employment group life insurance policies would remain in effect regardless of the dissolution of the marriage.

Newly Married:

If you have recently married and have children from a prior relationship, you need to make sure that your children’s interests are adequately protected. Federal law provides that employment retirement plans must provide that retirement funds must be paid to the new spouse after one year of marriage unless the new spouse consents otherwise in writing.  With respect to employment based group life insurance, the benefits are to be paid to the named beneficiaries without regard to any possible community property interest the spouse might have under state law. If these results are not what you desire, you and your new spouse need to review your beneficiary designations with a knowledgeable attorney to be sure that all is done to accomplish what you desire.

Change of state of residency:

If you have changed residence to a different state since executing your estate plan, the laws of the state of your prior residence may be entirely different from that of your new residence. This is especially true as to any Health Care Directive (Living Will”) or Durable Power of Attorney for Health Care you may have in place. These documents are usually specifically authorized by a specific statute in each state which often specifies the format. A local hospital or doctor may not be compelled to honor such a document if it is not executed according to the statutory directive of this state.

Change in Assets:

Sometimes your estate plan is affected when you substantially change the type of investments in your estate.  For example, if you have sold your home and invested the proceeds, your revocable living trust and/or will may provide a different beneficiary of your home than of your investment accounts. If you have recently purchased or are contemplating the purchase of a life insurance contract or annuity or are about to roll over a retirement account into an IRA account, the new beneficiary designation may not be adequately coordinated with your revocable living trust and/or will. In such events you would be well advised to have your estate planning attorney review your entire estate plan to determine whether it adequately provides for the disposition of property as you desire and whether you may be exposed to unnecessary estate taxes.

Circumstances of the Beneficiary:

Your estate plan can be affected not only by your own circumstances, but also by the circumstances of your intended beneficiaries. For example, if one of your beneficiaries is saddled with a substantial debt or is a spendthrift, your bequest to him/her could benefit his/her creditors first. Another example is a beneficiary that is receiving government funded disability payments. Your bequest directly to that beneficiary may terminate that beneficiary’s right to continue receiving disability payments.  These results can be avoided through properly drawn trust language in your revocable living trust or will. You should let me know if any unique circumstances of your beneficiaries arise.

A review should not only include the review of your will and/or revocable living trust, but it should also review the beneficiary designations on life insurance policies, annuities, IRA’s and other pensions plans, bank and investment account ownership and a review of any asset title questions you might have. You should also let us know if you anticipate receiving any large gifts or inheritances. Your estate plan should provide for the disposition of these assets in the event that you do receive these before you die.

If you have not reviewed your estate plan for a couple of years or more, your estate plan may no longer adequately provide for the disposition of property or avoid taxation as it should due to the change in the nature of property or due to a dramatic increase or decrease in the value of your estate. In addition to a review upon the happening of the above referenced events, it is wise to review your estate plan with us every other year to avoid problems. The larger or more unique your estate or beneficiaries are, the more important this biannual review becomes. More often than not, there are only minor or no changes necessary and the cost for the review is very small. In those situations where major changes are called for the cost will be more but the savings your estate will enjoy and your peace of mind will far exceed any such cost.

Please call David Meyer at 425.455.1002  or email him at David@Meyerlaw.net for assistance in reviewing and updating your estate planning or will documents.