Tax Day 2020: One of Many Occasions to Review Your Estate Plan

Many Californians start thinking about Tax Day on April 15th right after the New Year in January, as they start receiving W-2s, 1099s, and other important tax-related documentation.

Within a few weeks, a good percentage of people have already filed all income tax paperwork with the IRS. Once the deadline has passed, taxpayers are either anxiously looking forward to a refund or reluctantly getting ready to pay what more they owe.

One aspect of Tax Day that most people do not consider is how the annual date for income tax filing offers a perfect opportunity to review the estate plan they already have in place.

The documentation forwarded by employers, financial institutions, administrators of investment accounts, and other organizations provides a snapshot of a person’s net worth. Considering the fact that financial status drives many aspects of an estate plan, the weeks leading up to Tax Day 2020 are ideal in terms of timing.

Charles D. Stark, a Sonoma County attorney who focuses on wills, trusts, and estate planning, elaborated on the topic.

“So many people think they’re done with estate planning once they get their will, advance directives, and other documentation in place. They stow their documents away and let loved ones know where to find everything, assuming that the next time this paperwork will be relevant is upon their death.”

Mr. Stark described an important, informative hypothetical to stress his point.

“When you get your tax documentation covering income from all sources every January, you need to note any significant changes from previous years. Once you hit a certain level, you should discuss your situation with an estate planning lawyer. You might need a revocable trust alongside your will, or you may want to consider gift planning and more complicated forms of trusts.”

In addition, Mr. Stark referred to other scenarios in which it would be appropriate to review an existing estate plan and make modifications to update the arrangement. Certain milestones and life events to consider include:

  • Marriage, divorce, and remarriage;

  • Retirement;

  • The death of a beneficiary, executor, or trustee;

  • The point where children reach a point of financial stability, such that bequests to grandchildren are more appropriate;

  • A finding that a beneficiary is incapacitated, in which a special needs trust might be an ideal way to pass assets;

  • Concerns about a beneficiary’s irresponsible spending habits, making spendthrift trust provisions a wise strategy for maximizing trust distributions; and,

  • Many other life changes that could have an impact on an existing estate plan.



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