By: Janine A. Guillen, JD, MBA, LLM, RN

What is an Estate Planning Maintenance Plan? You may have already heard about a trend developing in which you can not only receive the essential planning documents from your estate planning attorney, but you can also pay an annual fee to have your attorney provide necessary updates and guidance as your life, your circumstances and the law changes.　 The key advantage to a maintenance plan is that it shifts estate planning into a relationship-based arrangement with your trusted lawyer, instead of simply a "one-and-done" event. In "one-and-done" planning you are leaving changed circumstances unattended to possibly create a family disaster.

What can change?

At least four things. 1) Your relationships and beneficiaries; 2) The laws – federal & state; 3) The size of your estate; and 4). The health status of you or your helper agents. Unattended changes in any of these four areas in your plan can be costly to address reactively and after the fact. Most plan changes, when addressed proactively can help make problems avoidable. An estate planning maintenance plan is the key.

Did you know…..

Over half of all adults in this country still do not do any estate planning at all, whereas all adults need one.　 Why?　 For three main reasons – 1) the government will dictate where and how your assets pass if you do not have your own estate plan; 2) most people do not understand what tremendous benefits result from having an estate plan or what dire consequences may result from not having one; and 2) some people mistakenly believe that only the rich need an estate plan.

Add to this that estate planning has traditionally been viewed as a ‘transactional relationship’ with a lawyer.　 In other words, most folks view estate planning as a few meetings with a lawyer and putting together an estate plan – once.

You have spent your entire life working hard for what you have. Is keeping what you have safe for your beneficiaries important to you? Is it important to you to minimize family conflict? Is it important to you that what you have stays out of the hands of the wrong people? Is it important to you that creditors and predators cannot get at what you leave your beneficiaries? Having an estate plan that will work as intended when you need it most is not a static process – it requires time and attention so that the risk of it failing is reduced or eliminated.

So, I can’t just get a will and be done with all this?

Typically, for those who have had estate planning in the past, the average will or estate plan has been in existence for about 20 years.　 In other words, on average the plan was drafted in the early 1990s and has not been updated since.

Is there a family that has not had major changes in 20 years? Doubtful. Few families escape the devastating effects of divorce, death, and illness.

Let’s also take a brief look at some of the major estate law changes that have occurred since the early 1990’s:

- The Omnibus Budget Reconciliation Act of 1993 – with a maximum 55% tax rate on
   taxable gifts over $3 million.  Estate tax exemption for an estate’s first $600,000 only.

- The Taxpayer Relief Act of 1997 – Provision to increase estate tax exemption to $1
   million by 2006. Also created deduction for family businesses exceeding 50% of the total
   estate.

- The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 – Gradual
   increase of estate tax exemption from $1 million with 50% maximum rate to ultimate|
   repeal in 2010.

- Tax Relief Act of 2010 – Unification of estate, gift, and generation-skipping transfers to
   maximum 35% tax rate with exemption on first $5 million. Rules in place for 2011 and
   2012 only.

- An estimated 126 new federal estate laws were enacted between 1981 and 1999.

 - These changes do not incorporate state law changes, including some states that now
    charge estate taxes under completely different exemptions and rules from federal law.

\In summary, there have been four major tax bills and dozens of minor changes in federal estate law over the last 20 years alone.　 These also do not include any additions or subtractions in one’s family or personal financial situation.

Is it any stretch to conclude that the laws may change substantially again over the next 20 years (let alone again in 2013 when the 2010 act expires)?　 Can you see why updating your estate plan is necessary?

So, I know my estate plan needs regular updating, but my lawyer charged me for my estate plan initially and now wants to charge me an annual fee each year for a maintenance plan --- How can that be justified ?

Well, do you pay ongoing annual fees for any of the following?

  • Life insurance
  • Homeowner’s insurance
  • Auto insurance
  • Health insurance
  • AAA
  • Financial Planning Services
  • Credit Cards
  • Fitness Club
  • Professional Memberships
  • Online Storage
  • Bookstore Memberships
  • Vacation Clubs
  • Netflix
  • Etc., etc., etc.

Is it important to make sure your assets pass to your heirs efficiently and effectively at least as important as any of the above?

To us, an estate planning maintenance plan is less about the annual fee than it is about developing further trust and understanding between lawyers and clients, and the lawyer truly working as your advocate to help you take care of your family.