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When Should You Update Your Estate Plan?
Many people think of estate planning as a “one-and-done” task — something you complete and file away. But an estate plan should evolve as your life and finances and relevant laws change. An outdated plan can create confusion, unintended tax consequences or outcomes that no longer reflect your wishes.
The higher federal gift and estate tax exemption that was made permanent by last year’s One Big Beautiful Bill Act is one reason to review your estate plan now. But you should also review your plan whenever something significant changes in your life. Let’s take a look at common situations that signal the need to revisit your will, trusts, powers of attorney or other estate planning documents.
Major life events
Life transitions are the most common reasons estate plans need attention. Marriage or remarriage is a big one, especially if you have children from a prior relationship. Divorce is equally important. Failing to update your documents could leave an ex-spouse in control of your assets or medical decisions.
The birth or adoption of a child or grandchild should also trigger a review. You’ll want to name a guardian or adjust beneficiary designations to reflect your growing family. Similarly, the death or incapacity of a spouse, beneficiary, trustee or executor means your plan may no longer function as intended.
Financial changes matter, too
Your estate plan should reflect your current financial situation. If your net worth has increased significantly — through business growth, inheritance, real estate appreciation or investment success — your existing plan may not adequately address tax planning or asset protection.
Starting, buying or selling a business is another major reason to update your estate plan. Business ownership often requires specific provisions for succession planning, valuation and continuity. Retirement also can prompt changes, as income sources shift and distribution strategies evolve.
Don’t forget supporting documents
Updating an estate plan isn’t just about your will or trusts. Beneficiary designations on retirement accounts and life insurance policies should be reviewed regularly, as they generally override what’s stated in your will.
Powers of attorney and health care directives are also critical to review. Make sure they continue to reflect your wishes and that those you’re providing with decision-making authority are still people you trust and who are able to serve.
The bottom line
An estate plan is only effective if it reflects your current wishes and circumstances, as well as current law. Regular reviews help ensure your assets are distributed as intended, your loved ones are protected, and unnecessary taxes or legal complications are avoided.
Because estate planning intersects with taxes, financial planning and your long-term goals, it’s wise to review your plan with qualified professionals. FMD can help you identify when updates may be needed and coordinate with your legal and financial advisors to keep your plan on track.
Increase Estate Planning Flexibility by Decanting an Irrevocable Trust
Irrevocable trusts provide various estate planning benefits, such as reducing estate taxes and helping to ensure assets are distributed as you wish. But estate planning isn’t a “set it and forget it” process. Families, tax laws and financial circumstances can change. A major downside of irrevocable trusts is that they’re difficult to update once they’ve been signed and funded. That’s where trust decanting can help.
What does it mean to “decant” a trust?
The term decanting comes from pouring wine from one bottle to another. In estate planning, it means transferring assets from an existing trust to a new trust that can better achieve your goals.
Depending on the trust’s language and the provisions of applicable state law, decanting may allow a trustee to:
Correct errors or clarify trust language,
Move the trust to a state with more favorable tax or asset protection laws,
Take advantage of new tax laws,
Remove beneficiaries,
Change the number of trustees or alter their powers,
Add or enhance spendthrift language to protect the trust assets from creditors’ claims, or
Move funds to a special needs trust for a disabled beneficiary.
Unlike assets transferred at death, assets that are transferred to a trust don’t receive a step-up in basis. As a result, they can subject the beneficiaries to capital gains tax on any appreciation in value. One potential solution is to use decanting.
Decanting can authorize the trustee to confer a general power of appointment over the assets to the trust’s grantor. This would cause the assets to be included in the grantor’s estate and, therefore, to be eligible for a step-up in basis. Depending on the size of the estate, this might make sense given today’s high gift and estate tax exemption ($15 million in 2026).
Beware of your state’s laws
Many states have decanting statutes, and in some states, decanting is authorized by common law. Either way, it’s critical to understand your state’s requirements. For example, in certain states, the trustee must notify the beneficiaries or even obtain their consent to decant.
Even if decanting is permitted, there may be limitations on its uses. Some states, for example, prohibit the use of decanting to eliminate beneficiaries or add a power of appointment. And most states won’t allow the addition of a new beneficiary. If your state doesn’t authorize decanting, or if its decanting laws don’t allow you to accomplish your objectives, it may be possible to move the trust to a state whose laws meet your needs.
Don’t forget about potential tax implications
One of the risks associated with decanting is uncertainty over its tax implications. For example, let’s say a beneficiary’s interest is reduced. Has he or she made a taxable gift? Does it depend on whether the beneficiary has consented to the decanting? If the trust’s language authorizes decanting, must it be treated as a grantor trust? Does such language jeopardize the trust’s eligibility for the marital deduction? Does distribution of assets from one trust to another trigger capital gains or other income tax consequences to the trust or its beneficiaries?
If you have tax-related questions, please contact FMD. We’d be pleased to help you better understand the pros and cons of decanting a trust.
Owning Real Estate in Multiple States can Negatively Affect Beneficiaries
A vacation home, rental property or future retirement residence may play an important role in your long-term plans. However, if you hold properties across multiple states, it can create estate planning issues that can be easily overlooked. If not addressed properly, these issues can have consequences for your heirs.
Multiple properties can result in multiple probate proceedings
Probate is a court-supervised administration of your estate. If real estate is titled in your name, that property generally must go through probate in the state where it’s located.
If probate proceedings are required in multiple states, the process can become expensive. For example, your representative will need to engage a probate lawyer in each state, file certain documents in each state and comply with other redundant administrative requirements.
Beyond cost and inconvenience, multiple probate proceedings can slow the transfer of property. This can create uncertainty for beneficiaries who need access to or control over the real estate.
A revocable trust can help avoid probate
A common strategy to avoid probate — especially for individuals with property in multiple states — is to transfer property to a revocable trust (sometimes called a “living trust”). When it comes to real estate, this generally involves preparing a deed transferring each property to the trust and recording the deed in the county where the property is located.
Property held in a revocable trust generally doesn’t have to go through probate. The reason is that the trust owns the property, not you. Your trustee manages or distributes the property according to the terms of the trust, without court involvement. A single revocable trust can hold real estate located in multiple states, potentially eliminating the need for separate probate proceedings in each jurisdiction.
Planning ahead makes a difference
While a revocable trust can be an effective solution, it must be structured and maintained correctly to achieve the intended results. Titling, state-specific rules and coordination with the rest of your estate plan all matter.
For example, will transferring a residence to a trust affect your eligibility for homestead exemptions from property taxes or other tax breaks? Will the transfer affect any mortgages on the property? Will it be subject to any real property transfer taxes? It’s also important to consider whether transferring title to property will affect the extent to which it’s shielded from the claims of creditors.
Review your properties and your estate plan
If you own — or are considering purchasing — real estate in another state, be sure to review how that property fits into your overall estate plan. FMD can assess the financial and tax implications and work with your legal advisors to help ensure your plan supports your long-term goals and protects your family.
Are You and Your Spouse Considering Splitting Gifts?
The gift tax annual exclusion allows you to transfer up to $19,000 (for 2026) per beneficiary gift-tax-free, without tapping your $15 million (for 2026) lifetime gift and estate tax exemption. You can double the exclusion amount if you elect to split the gifts with your spouse.
Gift-splitting in a nutshell
Gift-splitting allows married couples to treat a gift made by one spouse as if it were made equally by both spouses. This election can reduce future estate tax exposure and provide greater flexibility in passing wealth to the next generation.
For example, let’s say that you have two adult children and four grandchildren. You can gift each family member up to $19,000 tax-free by year end, for a total of $114,000 ($19,000 × 6). If you’re married and your spouse consents to a joint gift (or a “split gift”), the exclusion amount is effectively doubled to $38,000 per recipient, for a total of $228,000.
Avoid common mistakes
It’s important to understand the rules surrounding gift-splitting to avoid these common mistakes:
Misunderstanding IRS reporting responsibilities. Split gifts and large gifts trigger IRS reporting responsibilities. A gift tax return is required if you exceed the annual exclusion amount or give joint gifts with your spouse. Unfortunately, you can’t file a “joint” gift tax return. In other words, each spouse must file an individual gift tax return for the year in which you both make gifts.
Gift-splitting with a noncitizen spouse. To be eligible for gift-splitting, both spouses must be U.S. citizens.
Divorcing and remarrying. To split gifts, you must be married at the time of the gift. You’re ineligible for gift-splitting if you divorce and either spouse remarries during the calendar year in which the gift was made.
Gifting a future interest. Only present-interest gifts qualify for the annual exclusion. So gift-splitting can be used only for present interests. A gift in trust qualifies only if the beneficiary receives a present interest — for example, by providing the beneficiary with so-called Crummeywithdrawal rights.
Benefiting your spouse. Gift-splitting is ineffective if you make the gift to your spouse, rather than a third party; if you give your spouse a general power of appointment over the gifted property; or if your spouse is a potential beneficiary of the gift. For example, if you make a gift to a trust of which your spouse is a beneficiary, gift-splitting is prohibited unless the chances your spouse will benefit are extremely remote.
Be aware that, if you die within three years of splitting a gift, some of the tax benefits may be lost.
Proper planning required
Whether gift-splitting is right for you and your spouse depends on your estate size and long-term objectives, among other factors. Because the election involves technical requirements and potential implications for future planning, it’s important to carefully evaluate the strategy. FMD can help ensure that your split gifts comply with federal tax laws.
Take Steps to Help Ensure Your Estate Plan Won’t be Challenged after Your Death
It’s not uncommon for family members to contest a loved one’s will or challenge other estate planning documents. But you can take steps now to minimize the likelihood of such challenges after your death and protect both your wishes and your legacy.
Family disputes often arise not from legal flaws, but from confusion, surprise or perceived unfairness. By preparing a well-structured estate plan and clearly communicating your intentions to loved ones, you can reduce the risk of misunderstandings that can lead to challenges. There are also specific steps you can take to help fortify your plan against challenges.
Demonstrate a lack of undue influence
Family members might challenge your will by claiming that someone asserted undue influence over you. This essentially means the person influenced you to make estate planning decisions that would benefit him or her but that were inconsistent with your true wishes.
A certain level of influence over your final decisions is permissible. For example, there’s generally nothing wrong with a daughter encouraging her father to leave her the family vacation home. But if the father is in a vulnerable position — perhaps he’s ill or frail and the daughter is his caregiver — a court might find that he was susceptible to the daughter improperly influencing him to change his will.
There are many techniques you can use to demonstrate the lack of any undue influence over your estate planning decisions, including:
Choosing reliable witnesses. These should be people you expect to be available and willing to attest to your testamentary capacity and freedom from undue influence years or even decades down the road.
Videotaping the execution of your will. This provides an opportunity to explain the reasoning for any atypical aspects of your estate plan and can help refute claims of undue influence (or lack of testamentary capacity). Be aware, however, that this technique can backfire if your discomfort with the recording process is mistaken for duress or confusion.
In addition, it can be to your benefit to have a medical practitioner conduct a mental examination or attest to your competence at or near the time you execute your will.
Follow the law for proper execution
Never open the door for someone to contest your will on the grounds that it wasn’t executed properly. Be sure to follow applicable state laws to the letter.
Typically, that means signing your will in front of two witnesses and having your signature notarized. Be aware that laws vary from state to state, and an increasing number of states are permitting electronic wills.
Consider a no-contest clause
If your net worth is high, a no-contest clause can act as a deterrent against an estate plan challenge. Most, but not all, states permit the use of no-contest clauses.
In a nutshell, a no-contest clause will essentially disinherit any beneficiary who unsuccessfully challenges your will. For this strategy to be effective, you must leave heirs an inheritance that’s large enough that forfeiting it would be a disincentive to bringing a challenge. An heir who receives nothing has nothing to lose by challenging your plan.
Be proactive now to avoid challenges later
Other aspects of your estate plan, such as trusts and beneficiary designations for retirement plans and life insurance, could also be challenged. Taking steps now to minimize the risk of successful challenges to any of your estate planning documents can help protect your legacy and provide clarity and peace of mind for your loved ones. FMD can help you draft an estate plan that will meet legal requirements and accurately reflect your intentions, reducing the risk of challenges.
Leverage Your Gift Tax Annual Exclusion using a Crummey Trust
A Crummey trust provides a key tax benefit of an outright gift without some of the downsides. Although the mechanics can seem technical, the concept is straightforward. And the benefits can be significant for families looking to reduce estate taxes and provide long-term financial security.
How does a Crummey trust work?
A Crummey trust (named after the 1968 court case that first authorized its use) is a special type of trust that allows gifts to it to qualify for the gift tax annual exclusion. Yet unlike with an outright gift, you still determine, through the trust terms, how the assets will be managed and when they’ll ultimately be distributed to beneficiaries.
Generally, assets placed in a trust are treated as future interests and, therefore, don’t qualify for the annual exclusion ($19,000 per beneficiary in 2026). So you normally would have to use some of your lifetime gift and estate tax exemption ($15 million for 2026) to make tax-free gifts to a trust. However, a Crummey trust overcomes this limitation by granting beneficiaries a temporary right to withdraw contributions made to it.
Here’s how it works: Each time you contribute assets to the trust, the trustee must send a Crummey notice to the trust’s beneficiaries. This notice informs them that they have a limited window — typically 30 to 60 days — to withdraw their shares of the contribution. Because the beneficiaries technically have immediate access to the funds, the IRS treats the gift as a present interest, allowing it to qualify for the annual exclusion.
After the withdrawal period expires, the funds remain in the trust (assuming the beneficiaries didn’t exercise their withdrawal rights) and are managed and eventually distributed according to the trust terms, such as when beneficiaries reach specific ages or to fund certain types of expenses.
A Crummey trust is an irrevocable trust, meaning once assets are transferred into it, you, the grantor, generally can’t reclaim them. You determine the trust terms when you set up the trust. But, with limited exceptions, you can’t change them after the trust is initially funded. Because the trust is irrevocable, the trust assets won’t be included in your taxable estate, provided all applicable rules are met. This also effectively removes future appreciation on those assets from your taxable estate.
When can they be particularly beneficial?
Crummey trusts are often used in conjunction with irrevocable life insurance trusts (ILITs). An ILIT owns one or more policies on your life, and it manages and distributes policy proceeds according to your wishes. An ILIT keeps insurance proceeds, which could otherwise be subject to estate tax, out of your estate (and possibly your spouse’s).
You aren’t allowed to retain any powers over the policy, such as the right to change the beneficiaries. But the trust can be structured to make a loan to your estate for liquidity needs, such as paying estate tax.
Structuring ILITs as Crummey trusts allows annual exclusion gifts to fund the ILIT’s payment of insurance premiums. There’s an incentive for beneficiaries not to exercise their withdrawal rights so that the premiums can be paid to maintain the policy. The trust can potentially provide beneficiaries with a much larger payout later from the life insurance death benefit.
Any tax traps?
Before using a Crummey trust, it’s important to consider potential tax traps. One involves inadvertent taxable gifts from one beneficiary to another. Suppose, for example, that you set up a trust that provides income for your spouse for life, with any remaining assets passing to your daughter. To take advantage of the annual exclusion, you provide your spouse with Crummey withdrawal rights. Each time your spouse allows these rights to lapse without exercising them, he or she in effect has made a gift to your daughter by increasing the value of her future interest in the trust.
There are a couple of ways to avoid this result. One is to rely on the IRS’s “5&5” rule, which doesn’t count lapsing rights as a taxable gift as long as the withdrawal right doesn’t exceed the greater of $5,000 or 5% of the trust’s principal. So long as the trust principal is at least $380,000, you’ll be able to make $19,000 annual gifts without violating the 5&5 rule. Another option is to make the holder of Crummey withdrawal rights the sole beneficiary of the trust, which eliminates the gift tax concern.
Need help?
While a Crummey trust can be a powerful estate planning tool, it must be properly drafted and administered, including timely notices of withdrawal and careful recordkeeping. If you’re considering a Crummey trust, contact FMD. We can help ensure this trust type aligns with your broader financial and estate goals.
Address Your Elderly Parents in Your Estate Plan in 5 Steps
When creating or updating your estate plan, it’s important to address your elderly parents with both clarity and sensitivity. If you provide financial support, share housing or anticipate future caregiving responsibilities, your plan should reflect these realities.
Clearly documenting any ongoing assistance, loans or shared assets can help prevent misunderstandings among heirs later. In addition, if your parents have designated you to act on their behalf through powers of attorney or health care directives, your estate plan should align with those roles so there are no conflicting instructions or expectations.
5 steps
To incorporate your parents’ needs into your own estate plan, you first must understand their financial situation and any arrangements they’ve already made. Some may require tweaking. Here are five action steps:
1. List and value their assets. If you’re going to manage the financial affairs of your parents, having knowledge of their assets is vital. Compile and maintain a list of all their assets. These may include not only physical assets like their home and other real estate, vehicles, and any collectibles or artwork, but also investment holdings, retirement accounts and life insurance policies. You’ll need to know account numbers and current balances. Be sure to add in projections for Social Security benefits. When all is said and done, don’t be surprised if their net worth is higher or lower than what you (or they) initially thought. You can use this information to determine the appropriate planning techniques.
2. Identify key contacts. Compile the names and addresses of professionals important to your parents’ finances and medical conditions. This may include stockbrokers, financial advisors, attorneys, tax professionals, insurance agents and physicians.
3. Open the lines of communication. Before going any further, have a discussion with your parents, as well as other family members who may be involved, such as your siblings. Make sure you understand your parents’ wishes and explain the objectives you hope to accomplish.
4. Execute documents. Assuming you can agree on next steps, develop a plan that incorporates several legal documents. If your parents have already created one or more of these documents, they may need to be revised or coordinated with new ones. Some documents commonly included in an estate plan include:
Wills. Your parents’ wills control the disposition of their assets and tie up other loose ends. (Of course, jointly owned property with rights of survivorship automatically passes to the survivor.) Notably, a will also appoints an executor for your parents’ estates. If you’re the one lending financial assistance, you’re probably the optimal choice.
Living trusts. A living trust can supplement a will by providing for the disposition of selected assets. Unlike a will, a living trust doesn’t have to go through probate, which can save time and money while avoiding public disclosure.
Beneficiary designations. Your parents probably have filled out beneficiary designations for retirement accounts and life insurance policies. These designations supersede references in a will, so it’s important to keep them up to date.
Powers of attorney. A power of attorney authorizes someone to legally act on behalf of another person, such as to handle financial matters or make health care decisions. With a durable power of attorney, the most common version, the authorization continues should the person become unable to make decisions for him- or herself. This enables you to better handle your parents’ affairs.
Living wills or advance medical directives. These documents provide guidance for end-of-life decisions. Make sure your parents’ physicians have copies.
5. Make gifts. If you decide the best approach for helping your parents is to give them monetary gifts, it’s relatively easy to avoid gift tax liability. Under the gift tax annual exclusion, you can give each recipient up to $19,000 for 2026 without incurring gift tax, doubled to $38,000 per recipient if your spouse joins in the gift. If you give more, the excess may be transferred tax-free under your available lifetime gift and estate tax exemption ($15 million for 2026, less any exemption you’ve already used during your life).
Be wary, however, of giving gifts that may affect eligibility for certain government benefits. The availability of these benefits varies by state.
Plan for contingencies
Your estate plan should specify how you want to assist aging parents should they outlive you. For example, consider setting aside funds for their care or naming a trusted individual to manage those resources. Thoughtful provisions can reduce stress for your family and ensure your parents are treated with dignity and respect.
These situations often involve emotional and financial complexity. Contact FMD to help develop a comprehensive plan that addresses your family’s needs.
Making Health Care Decisions while You’re still Healthy Benefits You and Your Family
Integrating health care decisions into your estate plan is important because it ensures they are thoughtful, informed and reflective of your values. When you make decisions in advance, you can clearly outline preferences for medical treatment, end-of-life care and quality-of-life considerations without the pressures of an illness or crisis. As with other aspects of your estate plan, the time to act is now, while you’re healthy.
The benefits
Making key health-care-related decisions now can prevent confusion, delays and disagreements among family members and medical providers at moments when emotions are already high. Advance planning also allows you to name someone to make health decisions on your behalf. You can choose someone who you know understands your wishes and can confidently advocate for you if you become unable to speak for yourself.
Equally important, making these decisions while healthy can protect both you and your family from unnecessary stress and financial risk. Without documented health care directives, your family may be forced to seek court intervention or make rushed decisions with limited information, possibly leading to outcomes you wouldn’t have wanted.
2 documents do the heavy lifting
To ensure that your health care wishes are carried out and that your family is spared the burden of guessing — or arguing over — what you would decide, put those wishes in writing. Generally, that means executing two documents: a living will and a health care power of attorney (HCPA).
Unfortunately, these documents are known by many different names, which can lead to confusion. Living wills are sometimes called “advance directives,” “health care directives” or “directives to physicians.” And HCPAs may also be known as “durable medical powers of attorney,” “durable powers of attorney for health care” or “health care proxies.” In some states, “advance directive” refers to a single document that contains both a living will and an HCPA. For the sake of convenience, we’ll use the terms “living will” and “HCPA.”
It’s a good idea to have both a living will and an HCPA or, if allowed by state law, a single document that combines the two. Let’s take a closer look at each document:
Living will. This document expresses your preferences for the use of life-sustaining medical procedures, such as artificial feeding and breathing, surgery, or invasive diagnostic tests. It also specifies the situations in which these procedures should be used or withheld. Living wills often contain a do not resuscitate order, which instructs medical personnel to not perform CPR in the event of cardiac arrest.
While a living will details procedures you want and don’t want under specified circumstances, no matter how carefully you plan, a document you prepare now can’t account for every possible contingency down the road.
HCPA. This authorizes a surrogate — your spouse, child or another trusted representative — to make medical decisions or consent to medical treatment on your behalf when you’re unable to do so. It’s broader than a living will, which generally is limited to end-of-life situations, although there may be some overlap. An HCPA might authorize your surrogate to make medical decisions that don’t conflict with your living will, including consenting to medical treatment, placing you in a nursing home or other facility, or even implementing or discontinuing life-prolonging measures.
Although an HCPA can include specific instructions, it can also be used to provide general guidelines or principles and give your representative the discretion to deal with complex medical decisions and unanticipated circumstances (such as new treatment options).
This approach offers greater flexibility, but it also makes it critically important to appoint the right representative. Choose someone who you trust unconditionally, who’s in good health, and who’s both willing and able to make decisions about your health care. And be sure to name at least one backup in the event your first choice is unavailable.
Be proactive
Proactive planning can support better coordination with overall estate and financial strategies, helping you manage potential medical costs and preserve assets. By addressing health care decisions early, you can take control of your future, reduce the burden on loved ones and create peace of mind knowing your wishes will be respected no matter what lies ahead. Contact FMD with questions regarding a living will or an HCPA.
Should You Own Assets Jointly with an Adult Child?
Owning assets with your adult child as “joint tenants with right of survivorship” may seem like a simple way to streamline your estate plan. However, doing so can carry important legal, tax and practical implications that deserve careful consideration.
Positives and negatives
There are upsides to owning an asset — such as real estate, a bank or brokerage account, or a car — jointly with your child. For example, when you die, the asset will automatically pass to your child without the need for more sophisticated estate planning tools and without going through probate.
The downsides, however, can be considerable. When you add a child as a joint owner of an asset, he or she typically gains immediate ownership rights to the asset — not just a future interest. This means it may be subject to the child’s creditors, a divorce settlement or lawsuits. These external risks will be beyond your control and can jeopardize assets you’d planned to use to support yourself during retirement.
There can also be significant tax considerations. Adding a child as a joint owner may be treated as a taxable gift, depending on the asset and how ownership is structured. In addition, joint ownership can eliminate the step-up in cost basis that beneficiaries often receive at death, potentially increasing capital gains taxes when the asset is later sold. What appears to be a probate avoidance strategy can, in some cases, create a larger tax bill for the next generation.
Finally, joint ownership can override the intentions expressed in your will or trust. Assets held jointly with rights of survivorship generally pass directly to the surviving owner, regardless of what the estate plan says. This can unintentionally disinherit other children or beneficiaries and lead to family conflict. For many families, alternatives such as powers of attorney, beneficiary designations or revocable trusts provide greater flexibility and protection.
Right move for you?
Jointly owning assets with your child is a decision that you should make with care, not solely for convenience. While it may simplify access or avoid probate in some cases, it can also expose assets to unnecessary risk, create unintended tax consequences and undermine the goals of your otherwise well-structured estate plan.
Together with your estate planning attorney, FMD can help evaluate how joint asset ownership might fit into your broader estate plan and ensure that your assets are protected, family harmony is preserved and your wishes are carried out as intended.
Caution is Required when Addressing a Gun Collection in Your Estate Plan
For many, the primary reason for creating an estate plan is to ensure their assets are passed on to family members according to their wishes. But when it comes to estate planning, not all assets are created equal. One asset type that can be tricky to transfer to beneficiaries is firearms.
According to a Pew Research Center survey, nearly a third of adults (32%) said they own a gun. Another 10% replied that they don’t personally own a gun but someone in their household does. If you own one or more guns, careful planning is required to avoid running afoul of complex federal and state laws.
Understanding the law
Firearms are unique among personal property because federal and state laws prohibit certain persons from possessing them. For example, under the federal Gun Control Act, “prohibited persons” include:
Convicted felons,
Fugitives,
Unlawful drug users or addicts,
Mentally incompetent persons,
Illegal or nonimmigrant aliens, and
Persons convicted of certain crimes involving domestic violence or subject to certain domestic violence restraining orders.
Other persons may be prohibited from receiving firearms under state or local laws. These restrictions apply not only to your beneficiaries, but also to executors or trustees who come into possession of firearms.
In addition, under the federal National Firearms Act (NFA), certain firearms must be registered with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), and transfers of such firearms must follow NFA procedures. The classification of some firearms has become more complex because of litigation and evolving ATF rules.
Furthermore, additional steps must be taken when transporting guns across state lines. States may also require registration and may impose mandatory background checks, permits and other requirements for firearms.
Consider a gun trust
Incorporating a gun trust into your estate plan can be an effective way to manage and transfer firearms. A gun trust allows multiple designated trustees to legally possess and use the firearms, helping families avoid the risk of accidentally violating federal law. By placing these assets in a trust, owners can also streamline how the firearms are handled if they become incapacitated, ensuring that only authorized individuals retain lawful access.
From an estate planning perspective, a gun trust can provide privacy, continuity and clearer instructions for heirs. Firearms transferred through a properly drafted trust often avoid the delays and potential complications of probate, while giving the grantor control over who receives the weapons and under what conditions.
Seek professional estate planning advice
If you own a valuable gun collection and want to pass it on to heirs, it’s critical to consult with a qualified estate planning attorney. Indeed, given the complexity of federal and state gun laws, a gun trust may be the proper vehicle to transfer this type of asset.
Planning on Making Year-end Gifts? Take Advantage of Your Gift Tax Annual Exclusion
As the year draws to a close, it’s a great time to revisit your gifting strategy — especially if you want to transfer wealth efficiently while minimizing future estate tax exposure. One of the simplest and most powerful tools available is the gift tax annual exclusion. In 2025, the exclusion amount is $19,000 per recipient. (The amount remains the same for 2026.)
Be aware that you need to use your annual exclusion by December 31. The exclusion doesn’t carry over from year to year. For example, if you don’t make an annual exclusion gift to your granddaughter this year, you can’t add the unused 2025 exclusion to the 2026 exclusion to make a $38,000 tax-free gift to her next year.
How can you leverage the annual exclusion?
Making annual exclusion gifts is an easy way to reduce your potential estate tax liability. For example, let’s say that you have four adult children and eight grandchildren. In this instance, you may give each family member up to $19,000 tax-free by year end, for a total of $228,000 ($19,000 × 12).
Furthermore, the gift tax annual exclusion is available to each taxpayer. If you’re married and your spouse consents to a joint gift, also called a “split gift,” the exclusion amount is effectively doubled to $38,000 per recipient for 2025 and 2026.
Bear in mind that split gifts and large gifts trigger IRS reporting responsibilities. A gift tax return is required if you exceed the annual exclusion amount or you give joint gifts with your spouse. Unfortunately, you can’t file a “joint” gift tax return. In other words, each spouse must file an individual gift tax return for the year in which they both make gifts.
Also, beware that some types of gifts aren’t eligible for the annual exclusion. For example, gifts must be of a “present interest” to qualify.
What’s the lifetime gift tax exemption?
If you make gifts in excess of the annual exclusion amount (or gifts ineligible for the exclusion), you can apply your lifetime gift and estate tax exemption. For 2025, the exemption is $13.99 million. The One Big Beautiful Bill Act permanently increases the exemption amount to $15 million beginning in 2026, indexing it for inflation after that.
Note: Any gift tax exemption used during your lifetime reduces the estate tax exemption amount available at death.
Are some gifts exempt from gift tax?
Yes. These include gifts:
From one spouse to the other (as long as the recipient spouse is a U.S. citizen),
To a qualified charitable organization,
Made directly to a health care provider for medical expenses, and
Made directly to qualifying educational institution for a student’s tuition.
For example, you might pay the tuition for a grandchild’s upcoming school year directly to the college. The gift won’t count against the annual exclusion or your lifetime exemption.
Review your estate plan before making gifts
If you’re considering year-end giving, it may be helpful to review your overall estate plan and determine how annual exclusion gifts can support your long-term goals. FMD can help you identify which assets to give, ensure proper documentation and integrate gifting into your broader wealth transfer strategy.
Pairing a Living Trust with a Pour-over will can Help Cover All Your Assets
A living trust is one of the most versatile estate planning tools available. It offers a streamlined way to manage and transfer assets while maintaining privacy and control. Unlike a traditional will, a living trust allows your assets to pass directly to your beneficiaries without going through probate. By placing assets into the trust during your lifetime, you create a clear plan for how they should be distributed, and you empower a trustee to manage them smoothly if you become incapacitated. This combination of efficiency and continuity can provide significant peace of mind for you and your family.
However, even the most carefully created living trust can’t automatically account for every asset you acquire later or forget to transfer into it. That’s where a pour-over will becomes essential.
Defining a pour-over will
A pour-over will acts as a safety net by directing any assets not already held in your living trust to be “poured over” into the trust at your death. Your trustee then distributes the assets to your beneficiaries under the trust’s terms. Although these assets may still pass through probate, the pour-over will ensures that everything ultimately ends up under the trust’s umbrella, following the same instructions and protections you’ve already put in place.
This setup offers the following benefits:
Convenience. It’s easier to have one document controlling the assets than it is to “mix and match.” With a pour-over will, it’s clear that everything goes to the trust, and then the trust document determines who gets what. That, ideally, makes it easier for the executor and trustee charged with wrapping up the estate.
Completeness. Generally, everyone maintains some assets outside of a living trust. A pour-over will addresses any items that have fallen through the cracks or that have been purposely omitted.
Privacy. In addition to conveniently avoiding probate for the assets that are titled in the trust’s name, the setup helps maintain a level of privacy that isn’t available when assets pass directly through a regular will.
Understanding the roles of your executor and trustee
Your executor must handle specific bequests included in the will, as well as the assets being transferred to the trust through the pour-over provision before the trustee takes over. (Exceptions may apply in certain states for pour-over wills.) While this may take months to complete, property transferred directly to a living trust can be distributed within weeks of a person’s death.
Therefore, this technique doesn’t avoid probate completely, but it’s generally less costly and time consuming than usual. And, if you’re thorough with the transfer of assets made directly to the living trust, the residual should be relatively small.
Note that if you hold back only items of minor value for the pour-over part of the will, your family may benefit from an expedited process. In some states, your estate may qualify for “small estate” probate, often known as “summary probate.” These procedures are easier, faster and less expensive than regular probate.
After the executor transfers the assets to the trust, it’s up to the trustee to do the heavy lifting. (The executor and trustee may be the same person, and, in fact, they often are.) The responsibilities of a trustee are similar to those of an executor, with one critical difference: They extend only to the trust assets. The trustee then adheres to the terms of the trust.
Creating a coordinated estate plan
When used together, a living trust and a pour-over will create a comprehensive estate planning structure that’s both flexible and cohesive. The trust handles the bulk of your estate efficiently and privately, while the pour-over will ensures that no assets are left out or distributed according to default state laws. This coordinated approach helps maintain consistency in how your estate is managed and can reduce stress and confusion for your loved ones.
Because living trusts and pour-over wills involve legal considerations, we recommend working with an experienced estate planning attorney to finalize the documents. We can assist you with the related tax and financial planning implications. Contact FMD to learn more.
Ease the Burden on Your Family Immediately after Your Death by Planning Now
Planning for the end of life is never easy, but including your funeral and memorial wishes in your estate plan can relieve a major burden from your loved ones. When your family is grieving, decisions about burial or cremation, service preferences, or even the type of obituary you’d like can feel overwhelming. By documenting these choices in advance, you not only help to ensure your wishes are honored but also give your family clarity and comfort.
Express your wishes
First, make your wishes known to family members. This typically includes instructions about where you’re to be buried or cremated, the type of memorial service you prefer (if any), and even the clothing you’ll be buried in. If you don’t have a next of kin or would prefer someone else to be in charge of arrangements, you can appoint another representative.
Be aware that the methods for expressing these wishes vary from state to state. With the help of your attorney, you can include a provision in your will, language in a health care proxy or power of attorney, or a separate form specifically designed for communicating your desired arrangements.
Whichever method you use, it should, at a minimum, state 1) whether you prefer burial or cremation, 2) where you wish to be buried or have your ashes interred or scattered (and any other special instructions), and 3) the person you’d like to be responsible for making these arrangements. Some people also request a specific funeral home.
Weigh your payment options
There’s a division of opinion in the financial community as to whether you should prepay funeral expenses. If you prepay and opt for a “guaranteed plan,” you lock in the prices for the arrangements, no matter how high fees may escalate before death. With a “nonguaranteed plan,” prices aren’t locked in, but the prepayment accumulates interest that may be put toward any rising costs.
When weighing whether to use a prepaid plan, the Federal Trade Commission recommends that you ask the following questions:
What happens to the money you’ve prepaid?
What happens to the interest income on prepayments placed in a trust account?
Are you protected if the funeral provider goes out of business?
Before signing off on a prepaid plan, learn whether there’s a cancellation clause in the event you change your mind.
One alternative that avoids the pitfalls of prepaid plans is to let your family know your desired arrangements and set aside funds in a payable-on-death (POD) bank account. Simply name the person who’ll handle your funeral arrangements as the beneficiary. When you die, he or she will gain immediate access to the funds without the need for probate.
Incorporate your wishes into your estate plan
Thoughtful planning today can provide lasting peace of mind for the people you care about most. Don’t wait to incorporate your wishes into your estate plan — or to update your plan if needed.
Is a QTIP Trust Right for Your Blended Family?
A qualified terminable interest property (QTIP) trust can be a valuable estate planning tool if you have a blended family. In such families — where one or both spouses have children from prior relationships — there’s often a delicate balance between providing for a current spouse and preserving assets for children from a previous marriage. A QTIP trust helps achieve this by allowing you, the grantor, to ensure that your surviving spouse is financially supported during his or her lifetime while your remaining assets ultimately go to the beneficiaries you’ve designated.
QTIP trust in action
Generally, a QTIP trust is created by the wealthier spouse, though sometimes both spouses will establish such trusts. After the QTIP trust grantor’s death, the surviving spouse receives income from the trust for life, and in some cases, may also have access to principal if the trust terms allow it.
Basically, the surviving spouse assumes a “life estate” in the trust’s assets. A life estate provides the surviving spouse with the right to receive income from the trust but not ownership rights. This means that the surviving spouse can’t sell or transfer the assets.
Estate tax considerations
From an estate tax perspective, a QTIP trust also offers advantages. Assets transferred into the trust generally qualify for the marital deduction, meaning no estate tax is due at the first spouse’s death. The estate tax is deferred until the death of the surviving spouse, potentially allowing for more efficient tax planning.
This combination of financial security for the surviving spouse and inheritance protection for children makes a QTIP trust particularly well-suited for blended families seeking fairness, clarity and peace of mind in their estate plans.
Estate planning flexibility
A QTIP trust can also make your estate plan more flexible. For example, at the time of your death, your family’s situation or the estate tax laws may have changed. The executor of your will can choose to not implement a QTIP trust if that makes the most sense. Otherwise, the executor makes a QTIP trust election on a federal estate tax return. (It’s also possible to make a partial QTIP election — that is, a QTIP election on just a portion of the estate.)
To be effective, the election must be made on a timely filed estate tax return. After the election is made, it’s irrevocable.
Right for you?
If you’ve remarried and have children from your first marriage, consider the estate planning benefits of a QTIP trust. Questions? Contact FMD for additional information.
Your Family Needs to know How to Access your Estate Planning Documents
Making sure your family will be able to locate your estate planning documents when needed is one of the most important parts of the estate planning process. Your carefully prepared will, trust or power of attorney will be useless if no one knows where to find it.
When loved ones are grieving or faced with urgent financial and medical decisions, not being able to locate key documents can create unnecessary stress, confusion and even legal complications. Here are some tips on how and where to store your estate planning documents.
Your signed, original will
There’s a common misconception that a photocopy of your signed last will and testament is sufficient. In fact, when it comes time to implement your plan, your family and representatives will need your signed original will. Typically, upon a person’s death, the original document must be filed with the county clerk and, if probate is required, with the probate court as well.
What happens if your original will isn’t found? It doesn’t necessarily mean that it won’t be given effect, but it can be a major — and costly — obstacle.
In many states, if your original will can’t be produced, there’s a presumption that you destroyed it with the intent to revoke it. Your family may be able to obtain a court order admitting a signed photocopy, especially if all interested parties agree that it reflects your wishes. But this can be a costly, time-consuming process. And if the copy isn’t accepted, the probate court will administer your estate as if you died without a will.
To avoid these issues, store your original will in a safe place and tell your family how to access it.
Storage options include:
Leaving your original will with your accountant or attorney, or
Storing your original will at home (or at the home of a family member) in a waterproof, fire-resistant safe, lockbox or file cabinet.
What about safe deposit boxes? Although this can be an option, you should check state law and bank policy to be sure that your family will be able to gain access without a court order. In many states, it can be difficult for loved ones to open your safe deposit box, even with a valid power of attorney. It may be preferable, therefore, to keep your original will at home or with a trusted advisor or family member.
If you do opt for a safe deposit box, it may be a good idea to open one jointly with your spouse or another family member. That way, the joint owner can immediately access the box in the event of your death or incapacity.
Other documents
Original trust documents should be kept in the same place as your original will. It’s also a good idea to make several copies. Unlike a will, it’s possible to use a photocopy of a trust. Plus, it’s useful to provide a copy to the person who’ll become trustee and to keep a copy to consult periodically to ensure that the trust continues to meet your needs.
For powers of attorney, living wills or health care directives, originals should be stored safely. But it’s also critical for these documents to be readily accessible in the event you become incapacitated.
Consider giving copies or duplicate originals to the people authorized to make decisions on your behalf. Also consider providing copies or duplicate originals of health care documents to your physicians to keep with your medical records.
Clear communication is key
Clearly communicating the location of your estate planning documents can help ensure your wishes are carried out promptly and accurately. Let your family, executor or trustee know where originals are stored and how to access them. Contact FMD for help ensuring your estate plan will achieve your goals.
Don’t Forget to Include a Residuary Clause in Your Will
When creating a will, most people focus on the big-ticket items — including who gets the house, the car and specific family heirlooms. But one element that’s often overlooked is the residuary clause. This clause determines what happens to the remainder of your estate — the assets not specifically mentioned in your will. Without one, even a carefully planned estate can end up in legal limbo, causing unnecessary stress, expense and conflict for your loved ones.
Defining a residuary clause
A residuary clause is the part of your will that distributes the “residue” of your estate. This residue includes any assets left after specific bequests, debts, taxes and administrative costs have been paid. It might include forgotten bank accounts, newly acquired property or investments you didn’t specifically name in your will.
For example, if your will leaves your car to your son and your jewelry to your daughter but doesn’t mention your savings account, the funds in that account would fall into your estate’s residue. The residuary clause ensures those funds are distributed according to your wishes — often to a named individual, group of heirs or charitable organization.
Omitting a residuary clause
Failing to include a residuary clause can create serious problems. When assets aren’t covered by specific instructions in a will, they’re considered “intestate property.” This means those assets will be distributed according to state intestacy laws rather than your personal wishes. In some cases, this could result in distant relatives inheriting part of your estate or assets going to individuals you never intended to benefit.
Without a residuary clause, your executor or family members may also need to seek court intervention to determine how to handle the leftover property. This adds time, legal costs and emotional strain to an already difficult process.
Moreover, the absence of a residuary clause can lead to family disputes. When the law, rather than your will, determines who gets what, heirs may disagree over how to interpret your intentions. A simple clause could prevent these misunderstandings and preserve family harmony.
Adding flexibility to your plan
A key advantage of a residuary clause is added flexibility. Life circumstances change — new assets are acquired, accounts are opened or closed, and property values fluctuate.
If your will doesn’t specifically list every asset (and most don’t), a residuary clause acts as a safety net to ensure nothing is left out. It can even account for unexpected windfalls or proceeds from insurance or lawsuits that arise after your passing.
Providing extra peace of mind
Including a residuary clause in your will is one of the simplest ways to make sure your entire estate is handled according to your wishes. It helps avoid gaps in your estate plan, minimizes legal complications and ensures your executor can distribute your assets smoothly. Contact FMD for additional details. Ask your estate planning attorney to add a residuary clause to your will.
Beware the Pitfalls of DIY Estate Planning
A do-it-yourself (DIY) estate plan may seem appealing to those who feel confident managing their own affairs and want to save money. With the abundance of online templates and legal software, it’s easier than ever to draft a will, establish powers of attorney or create a trust without professional help. However, there are significant drawbacks to consider.
Online tools vs. professional guidance
Estate planning is a legal matter, and small mistakes can result in major unintended consequences. Errors in wording, missing signatures or failure to meet state-specific requirements can render documents invalid or lead to disputes among heirs.
DIY tools often provide limited customization, which can be problematic for blended families, business owners or those with special needs beneficiaries. Additionally, these online platforms can’t provide personalized advice or foresee complex tax implications the way experienced estate planning attorneys and tax professionals can.
Although online tools can help you create individual documents — the good ones can even help you comply with applicable laws, such as ensuring the right number of witnesses to your will — they can’t help you create an estate plan. Putting together a plan means determining your objectives and coordinating a collection of carefully drafted documents designed to achieve those objectives. And in most cases, that requires professional guidance.
For example, let’s suppose Anna’s estate consists of a home valued at $1 million and an investment account with a $1 million balance. She uses a DIY tool to create a will that leaves the home to her son and the investment account to her daughter. On the surface, this seems like a fair arrangement. But suppose that by the time Anna dies, she’s sold the home and invested the proceeds in her investment account. Unless she amended her will, she’ll have inadvertently disinherited her son.
An experienced estate planning advisor would have anticipated such contingencies and ensured that Anna’s plan treated both children fairly, regardless of the specific assets in her estate.
DIY tools also fall short when a decision demands a professional’s experience rather than mere technical expertise. Online tools make it easy to name a guardian for your minor children, for example, but they can’t help you evaluate the many characteristics and factors that go into selecting the best candidate.
Don’t try this at home
Ultimately, while a DIY estate plan may be better than having no plan at all, it carries considerable risks. Professional guidance ensures your wishes are properly documented and legally sound, reducing the likelihood of costly mistakes or family conflicts. For most people, consulting a qualified estate planning advisor, including an attorney and a CPA who understands estate tax law, is a worthwhile investment in protecting one’s legacy and loved ones’ peace of mind.
Does your Estate Plan Include a Financial Power of Attorney?
Your estate planning goals likely revolve around your family, including both current and future generations. But don’t forget to take yourself into consideration. What if you become incapacitated and are unable to make financial decisions? A crucial component to include in your estate plan is a financial power of attorney (POA).
What’s a financial POA?
Without a POA, if you become incapacitated because of an accident or illness, your loved ones won’t be able to manage your finances without going through the lengthy and expensive process of petitioning the court for guardianship or conservatorship. Executing a financial POA, also known as a POA for property, protects your family from having to go through this process and helps ensure financial decisions and tasks won’t fall through the cracks.
This document appoints a trusted representative (often called an “agent”) to make financial decisions on your behalf. It authorizes your agent to manage your investments, pay your bills, file tax returns and otherwise handle your finances, within the limits you set.
Differences between springing and durable POAs
One important decision you’ll need to make is whether your POA should be “springing” — effective when certain conditions are met — or nonspringing (also known as “durable”), which is effective immediately.
A springing POA activates under certain conditions, typically when you become incapacitated and can no longer act for yourself. In most cases, to act on your behalf, your agent must present a financial institution or other third party with the POA as well as a written certification from a licensed physician stating that you’re unable to manage your financial affairs.
While a springing POA lets you retain full control over your finances while you’re able, a durable POA offers some distinct advantages:
It takes effect immediately, allowing your agent to act on your behalf for your convenience, not just when you’re incapacitated.
If you do become incapacitated, it allows your agent to act quickly on your behalf to handle urgent financial matters without the need for a physician to certify that you’ve become incapacitated. With a springing POA, the physician certification requirement can lead to delays, disputes or even litigation at a time when quick, decisive action is critical.
It may also be advantageous for elderly individuals who are mentally capable of handling their affairs but prefer to have assistance.
Durable POAs have one potential disadvantage that must be considered: You might be uncomfortable with a POA that takes effect immediately because you’re concerned that your agent may be tempted to abuse his or her authority. However, if you can’t fully trust someone with an immediate POA, it’s even riskier to rely on that person when you’re incapacitated and unable to protect yourself.
In light of the advantages of durable POAs and the potential delays caused by springing POAs, consider granting a durable POA to someone you trust completely, such as your spouse or one of your children. If you’d like added security, you could ask your attorney or another trusted advisor to hold the durable POA and deliver it to the designated agent only when you instruct them to do so or you become incapacitated.
Revisit and update your POAs
A critical estate planning companion to a financial POA is a health care POA (also known as a health care proxy). It gives a trusted person the power to make health care decisions for you. To ensure that your financial and health care wishes are carried out, consider preparing and signing both types of POA as soon as possible.
Also, don’t forget to let your family know how to gain access to the POAs in case of an emergency. Finally, financial institutions and health care providers may be reluctant to honor a POA that was executed years or decades earlier. So, it’s a good idea to sign new POAs periodically. Contact FMD with any questions regarding POAs.
Feeling Charitable? Be Sure you can Substantiate Your Gifts
As the end of the year approaches, many people give more thought to supporting their favorite charities. If you’re charitably inclined and you itemize deductions, you may be entitled to deduct your charitable donations. Note that the key word here is “may” because there are certain limitations and requirements your donations must meet.
To be eligible to claim valuable charitable deductions, you must substantiate your gifts with specific documentation. Here’s a breakdown of the rules.
Cash donations
Cash donations of any amount must be supported by one of two types of documents that display the charity’s name, the contribution date and the amount:
1. Bank records. These can include bank statements, electronic fund transfer receipts, canceled checks (including scanned images of both sides of a check from the bank’s website) or credit card statements.
2. Written communication. This can be in the form of a letter or email from the charity. A blank pledge card furnished by the charity isn’t sufficient.
In addition to the above, cash donations of $250 or more require a contemporaneous written acknowledgement (CWA) from the charity that details the following:
The contribution amount, and
A description and good faith estimate of the value of any goods or services provided in consideration (in whole or in part) for the donation.
A single document can meet both the written communication and CWA requirements. For the CWA to be “contemporaneous,” you must obtain it by the earlier of 1) the extended due date of your tax return for the year the donation is made, or 2) the date you file your return.
If you make charitable donations via payroll deductions, you can substantiate them with a combination of an employer-provided document — such as Form W-2 or a pay stub — that shows the amount withheld and paid to the charity, and a pledge card or similar document prepared by or at the direction of the charity showing the charity’s name.
For a donation of $250 or more by payroll deduction, the pledge card or other document must also state that the charity doesn’t provide any goods or services in consideration for the donation.
Noncash donations
If your noncash donation is less than $250, you can substantiate it with a receipt from the charity showing the charity’s name and address, the date of the contribution, and a detailed description of the property. For noncash donations of $250 or more, there are additional substantiation requirements, depending on the size of the donation:
Donations of $250 to $500 require a CWA.
Donations over $500, but not more than $5,000, require a CWA and you must complete Section A of Form 8283 and file it with your tax return. Section A includes a description of the property, its fair market value and the method of determining that value.
Donations over $5,000 require all the above, plus you must obtain a qualified appraisal of the property and file Section B of Form 8283 (signed by the appraiser and the charity). There may be additional requirements in certain situations. For instance, if you donate art of $20,000 or more, or if any donation is valued over $500,000, you must attach a copy of the appraisal to your return. Note: No appraisal is required for donations of publicly traded securities.
Additional rules may apply for certain types of property, such as vehicles, clothing and household items, and privately held securities.
Charitable giving in 2026
Generally, charitable donations to qualified organizations are fully deductible up to certain adjusted gross income (AGI)-based limits if you itemize deductions. The One Big Beautiful Bill Act (OBBBA) creates a nonitemizer charitable deduction of up to $1,000, or $2,000 for joint filers, which goes into effect in 2026. Only cash donations qualify.
Also beginning in 2026, a 0.5% floor will apply to itemized charitable deductions. This generally means that only charitable donations in excess of 0.5% of your AGI will be deductible if you itemize deductions. So, if your AGI is $100,000, your first $500 of charitable donations for the year won’t be deductible. Contact us for help developing a charitable giving strategy that aligns with the new rules under the OBBBA and times your gifts for maximum impact.
Make charitable gifts for the right reasons
For most people, saving taxes isn’t the primary motivator for making charitable donations. However, it may affect the amount you can afford to give. Substantiate your donations to ensure you can claim the deductions you deserve. If you’re unsure whether you’ve properly substantiated your charitable donation, contact FMD.
Don’t Let Beneficiary Designations Thwart your Estate Plan
For many individuals, certain assets bypass their wills or trusts and are transferred directly to loved ones through beneficiary designations. These nonprobate assets may include IRAs and certain employer-sponsored retirement accounts, life insurance policies, and some bank and brokerage accounts. This means that if you aren’t careful with your beneficiary designations, some of your assets might not be distributed as you expected. Not only does this undermine your intentions, but it can also create unnecessary conflict and hardship among surviving family members.
3 steps
Here are three steps to help ensure your beneficiary designations will align with your estate planning goals:
1. Name a primary beneficiary and a contingent beneficiary. Without a contingent beneficiary for an asset, if the primary beneficiary dies before you — and you don’t designate another beneficiary before you die — the asset will end up in your general estate and may not be distributed as you intended. In addition, certain assets are protected from your creditors, which wouldn’t apply if they were transferred to your estate. To ensure that you control the ultimate disposition of your wealth and protect that wealth from creditors, name both primary and contingent beneficiaries and don’t name your estate as a beneficiary.
2. Reconsider beneficiaries to reflect changing circumstances. Designating a beneficiary isn’t a “set it and forget it” activity. Failure to update beneficiary designations to reflect changing circumstances creates a risk that you’ll inadvertently leave assets to someone you didn’t intend to benefit, such as an ex-spouse.
It’s also important to update your designation if the primary beneficiary dies, especially if there’s no contingent beneficiary or if the contingent beneficiary is a minor. Suppose, for example, that you name your spouse as the primary beneficiary of a life insurance policy and name your minor child as the contingent beneficiary. If your spouse dies while your child is still a minor, it may be advisable to name a new primary beneficiary — such as a trust — to avoid the complications associated with leaving assets to a minor (court-appointed guardianship, etc.). Note that there are many nuances to consider when deciding to name a trust as a beneficiary.
3. Take government benefits into account. If a loved one depends on Medicaid or other government benefits — for example, a disabled child — naming that person as primary beneficiary of a retirement account or other asset may render him or her ineligible for those benefits. A better approach may be to establish a special needs trust for your loved one and name the trust as beneficiary.
Avoiding unintentional outcomes
Not paying proper attention to beneficiary designations can also expose your estate to costly delays and legal disputes. If a listed beneficiary is no longer living, or if a designation is vague or incomplete, an asset may have to go through probate, which defeats the purpose of naming beneficiaries in the first place.
This can increase expenses, delay distributions and create stress for your family during an already difficult time. Carefully making beneficiary designations and regularly reviewing and updating them helps ensure your asset distributions align with your current wishes, helps prevent disputes, and helps protect your family from unintended financial complications. Contact FMD with questions regarding your estate plan.