When you are in business you recognize the need to react to ever-changing circumstances even though you have a business plan in place. The same thing is true of your investments; you have to constantly respond to changing market conditions to ensure the strength of your position. Both of the above activities are actually kind of fun, like playing chess, so most people embrace these ongoing challenges. But for many, estate planning doesn’t fit into the same category. And it’s true that estate planning involves some matters that are not the most pleasant things to think about, so it can be easy to push these matters to the back burner.
Because it is easy to understand why you may not prioritize reviewing your estate plan doesn’t make it right. Estate planning fits right alongside long term financial and retirement planning, and the relevant conditions that impact your estate plan are dynamic just like those that affect your business and investments. Some of them are external and out of your control, like the changing estate tax exclusion. If your estate was valued at $3 million and you had passed away in 2009 or 2010 your heirs would owe no estate tax. But if you were to die in 2011 $1.1 million would be due. These are some pretty significant changes and this wide variance in potential tax responsibility underscores the need for consistent estate plan reviews.
When you are planning anything you do a cost analysis. But this is an imperfect science because you don’t know with certainty what something will cost in the future, and this is very relevant to long term planning. For example, long term care costs rose about 5% from 2009 to 2010; the cost of a year in an assisted living facility was nearly $40,000 on average. If you made plans years ago using the numbers as they existed in 1995 for example, unless you had a very accurate crystal ball you probably didn’t plan for an expense of this magnitude.
Things are always changing, so if you want to be prepared for all of the eventualities of aging is it important to revisit your estate plan regularly and be ready to make adjustments.