Even once you complete your estate plan, you know the importance of reviewing and updating periodically. Your circumstances may change, there may be new beneficiaries to include or exclude, or other issues can arise in the time since you executed the relevant documents. Another key factor that should spur you to check your estate plan is changes in state and federal laws, along with tax regulations that undergo adjustments annually.
Regardless of whether you retained legal help the first time around, it is critical to work with a North Carolina wills and estate planning attorney when reviewing or making changes to your existing strategy; anyone starting the process from scratch can also benefit from a consultation. Still, for reference purposes, you should be aware of legal developments that may affect your estate plan in 2021.
- Changes to Certain IRAs: The Setting Every Community Up for Retirement Enhancement (SECURE) Act went into effect in January 2020, and it made a key change to some retirement plans that you may need to address before the year’s end. This federal statute eliminates what is familiarly known as the “stretch” IRA, which – before enactment – offered two advantages when the beneficiary is not your spouse:
- The beneficiary of the IRA could choose to receive required minimum distributions (RMDs) over his or her lifetime, during which time the value of the IRA could grow without incurring tax liability.
- The beneficiary could then pass his or her payments by will to another individual upon death, essentially stretching the IRS distributions out over many years.
Under the SECURE Act, you can still name a non-spouse beneficiary; however, he or she must withdraw all funds from the IRA within 10 years after you pass away. Therefore, you should talk to your attorney about the implications for any IRA that is part of your estate plan.
- Gift Tax Exemptions: In 2017, the U.S. Tax Cuts and Jobs Act (TJCA) increased the exemption levels for estate and gift taxes – essentially doubling the amount that you could protect through your estate plan. These amounts are scheduled to sunset; in 2026; they could also be repealed by future administrations. High net worth individuals should consider making gifts now, either to individual beneficiaries or qualifying trusts.
- Potential Elimination of the “Step Up” in Basis: Anyone who may have concerns about capital gains taxes should be aware that a new administration could mean changes to step up in basis regulations. A recent Forbes article reveals that you may not be able reset the value of an asset, and thereby reduce the implications of capital gains taxes, by passing it to an heir.
- Supplemental Estate Planning Documents: Your estate plan review for end of 2020 should include asking yourself a few key questions:
- Have your financial circumstances changed to the point of needing a trust?
- Did you prepare other essential documents provided for in the North Carolina statute on Powers of Attorney?
- For important assets which you acquired in 2020, have you transferred title from your individual name to the trust?
Wrap Up End-of-Year 2020 with Help from a North Carolina Estate Planning Lawyer
These developments may or may not impact your existing estate plan, but the beginning of a new year is always a good time to review what you have in place. For those who have not yet taken the leap, a resolution to work on your estate plan is a good way to start 2021. To learn more about how an experienced estate planning attorney can assist, please call Mullen Holland & Cooper P.A. at 704.864.6751 or go online to set up a consultation. Our lawyers serve clients throughout Gaston County, Western North Carolina, and Upstate South Carolina from our offices in Gastonia, NC.