You have the advantage over me, Dear Reader. You know how the election turned out.
Oh, I have a general idea. As I write this, it is November 4, the day after the election. At this point it looks like Biden is going to edge out Trump, the Senate will remain in Republican hands, and the Democrats will hang onto the House.
I was waiting until today, when I thought I would know who won, to write my Senior Voice column. I expected that the Democrats would most likely control both houses of Congress, and the presidency, and that would mean we were looking at significant changes to the tax laws during this next year. I was planning to write a lengthy column about what sorts of moves people should make to protect their assets, given the expected tax hikes.
And then things changed.
Now, sitting here looking at the preliminary results (again, please don’t laugh at me if things have since gone in a completely different direction), it appears there will not be any significant tax changes, at least not in the next two years. There may be minor ones, there may even be changes which will affect estate planning, but Mitch McConnell and his crew will block any huge changes to the tax laws.
Changes sure do happen, don’t they? I’ve been practicing law for 33 years, and every so often there have been major changes to the laws affecting estate planning. The first really big one I saw was in 2001 when the exclusion from estate taxes went from $675,000 up to $1 million, with automatic increases after that. In 2004 the Alaska Legislature passed the Health Care Decisions Act. In 2011 the Congress passed “spousal portability” so that a surviving spouse could carry their deceased spouse’s estate tax exclusion with them, and it would be added to their own exclusion on death. In 2017 it was the Tax Cuts and Jobs Act, which ran the estate tax exclusion all the way up to $11 million. Less than a year ago, it was the “Secure Act” changing how inherited IRAs can be managed. And there were plenty of smaller changes as well.
Those were changes in the laws. But in the meantime, plenty of my clients had changes in their life circumstances. People had children, and their children had children. People got married, and divorced. People had medical crises. Heirs developed issues, or recovered from them. Financial circumstances changed, sometimes for the worse and sometimes for the better. People bought and sold homes, opened and closed accounts, and otherwise shuffled their assets around. And of course, people died.
That famous chemist, Walter White, said that chemistry is the science of change. I would say that life is all about change. And mankind didn’t reach the top of the food chain without being able to adapt to changed circumstances.
So here are a few suggestions for planning your life in a world in which, to borrow from a Disney princess, you never step in the same river twice.
Be careful of anything irrevocable. Sometimes there are good reasons to do things which cannot be altered later. For instance, financial planning, Medicaid concerns, or tax considerations might call for giving assets away, establishing an irrevocable trust, or buying a particular type of annuity. You may want to do some of these things anyway, but do them with your eyes open, be aware of the risks, and if possible leave yourself some wiggle room. You don’t know what will happen tomorrow.
Check in with your estate planner. I generally tell clients they should see me at least once every three years, although truth be told, I’m happy if I hear from them every five. If there is a major change in the laws, I try to get the word out to as many of my clients as possible, but a lot of those letters and e-mails bounce back, because my clients have changed their addresses without telling me.
Be aware of your plan. I meet a lot of people who don’t even know what their estate planning documents do. You need to know that; if you don’t, sit down with an estate planner and have them go through the documents with you. If the estate planner you currently use isn’t willing to do that, get a better one. You may not need to understand every single detail, but you need to know enough to recognize when you need to contact your estate planner.
Be alert when you acquire. One of the most common changes in life is that you buy things. You don’t necessarily need to change your estate plan just because you bought or inherited a new asset, but you do need to make sure that the way you have handled the new thing is consistent with your estate plan. For example if you have a living trust because you are hoping your heirs will be able to avoid probate, and you later buy a cabin on the Yentna, you need to make sure you put it into your trust. If it is just sitting there titled in your own name, it could eventually trigger a probate.
Have a plan. Maybe I should have led with this one. Most people don’t have any kind of estate plan, not even a simple will. What kind of plan you need depends on your situation, but you need to have a plan. If you don’t have that, none of these other suggestions make any sense.
A French writer once said “plus ca change, plus c’est la meme chose,” which we usually translate into English as “the more things change, the more they remain the same,” or “the only constant is change”. If you have a plan, it can usually be adapted fairly easily to new circumstances. But you need to have a plan in the first place.
Kenneth Kirk is an Anchorage estate planning lawyer. Nothing in this article should be taken as legal advice for a specific situation; for specific advice you should consult a professional who can take all the facts into account. Even the ones that change.
