Spring Cleaning Your Estate Plan: Essential Updates for 2025
As the blossoms of spring emerge, it's an ideal time to refresh not only your home but also your estate plan. Regularly reviewing and updating your estate planning documents ensures they align with current laws and accurately reflect your wishes. In 2025, several critical changes make this spring particularly significant for such reviews. Here's a comprehensive guide to the key areas you should focus on during your estate plan spring cleaning and when to get your Raleigh Estate Planning Attorney involved.
1. Review and Update Your Will and Trusts
Assess Beneficiary Designations
Life events such as births, deaths, marriages, or divorces can alter your intended beneficiaries. Ensure that your will and any trusts accurately reflect your current intentions. Outdated beneficiary designations can lead to unintended individuals inheriting your assets.
Evaluate Trustee and Executor Appointments
Confirm that the individuals you've designated as trustees and executors are still willing and able to fulfill these roles. Changes in relationships or a person's capacity to serve may necessitate updates to these appointments.
2. Understand the 2025 Federal Estate Tax Changes | Raleigh Estate Planning Attorney
Increased Exemption in 2025
In 2025, the federal estate tax exemption has reached a historic high of $13.99 million per individual ($27.98 million for married couples)
This means you can transfer up to these amounts without incurring federal estate taxes.
Anticipate the 2026 Reduction
However, this elevated exemption is set to decrease to approximately $7 million per individual on January 1, 2026
To maximize tax benefits, consider making substantial gifts or other estate planning moves before the exemption decreases.
3. Update Powers of Attorney and Healthcare Directives
Financial and Medical Powers of Attorney
Review and, if necessary, update your financial and medical powers of attorney. Ensure the individuals you've appointed to make decisions on your behalf still align with your preferences and are capable of managing your affairs.
Advance Healthcare Directives
Confirm that your living will or advance healthcare directive reflects your current medical treatment preferences. Discuss these directives with your appointed healthcare proxy to ensure they understand and are prepared to honor your wishes.
4. Reassess Asset Ownership and Beneficiary Designations
Retirement Accounts and Life Insurance Policies
Verify that the beneficiaries listed on your retirement accounts and life insurance policies are current. Beneficiary designations on these accounts supersede instructions in your will, making it crucial they are up to date.
Jointly Owned Property
Review any jointly owned assets to ensure they are titled correctly and align with your estate planning goals. Misalignment can lead to probate complications or unintended asset distribution.
5. Plan for the 10-Year Rule on Inherited IRAs
The 10-year rule requires beneficiaries of inherited IRAs to withdraw all funds within ten years, potentially leading to significant tax implications
Strategize on how to manage these distributions to minimize tax burdens, possibly by coordinating withdrawals with lower-income years.
6. Consider State-Specific Estate Tax Laws
While the federal exemption is substantial, some states impose their own estate or inheritance taxes with lower thresholds. Review your state's laws to determine if your estate might be subject to state-level taxes and plan accordingly.
7. Evaluate Gifting Strategies
With the current high federal exemption, 2025 presents an opportunity for tax-efficient gifting. Consider transferring assets to heirs now to reduce the taxable value of your estate before the exemption decreases in 2026.
8. Review Business Succession Plans
If you own a business, ensure your succession plan is current. This includes updating any buy-sell agreements and ensuring your business interests are aligned with your overall estate planning objectives.
9. Protect Digital Assets
In our increasingly digital world, it's essential to account for digital assets in your estate plan. This includes online accounts, digital currencies, and intellectual property. Ensure access information is documented, and designate someone to manage these assets in the event of your incapacity or death.
10. Consult with an Estate Planning Professional
Given the complexities and impending changes in estate tax laws, it's advisable to consult with an estate planning attorney or financial advisor. They can provide personalized guidance to ensure your estate plan is optimized for your specific circumstances and compliant with current laws.
Conclusion
Spring offers a natural reminder to refresh various aspects of our lives. In 2025, with significant changes on the horizon for estate taxes and regulations, it's particularly prudent to revisit and update your estate plan. By addressing the areas outlined above with your Raleigh Estate Planning Attorney, you can ensure your estate plan remains robust, reflective of your wishes, and optimized for the current legal landscape.
