Ethan R. Okura
Hawai‘i Herald Columnist
Spring is in the air! So what does that mean? It means it’s time to do your spring cleaning — time to get rid of all the junk that you’ve accumulated over the past year, deep-clean the house and freshen it up. It also means that it’s time to clean up and update that old estate plan.
Keep in mind that estate planning is a process — not a one-time event. After creating your will or trust, you need to periodically check in with your estate planning attorney to make sure that it’s still up to date. Some of the main reasons why your estate plan might be out of date include:
1) Laws change. This is the biggest reason we need to make sure your estate plan is always current. Depending on your main concerns, your estate plan, will and trust may not have to be updated for years. However, laws can change at any time and what you did last year might already be outdated.
2) Your family circumstances change. We often see clients who set up their estate plan, naming their closest child — the one who lives with them — as their agent under their power of attorney and as trustee of their trust. But sometimes things change and that child may move away and another of your children may return to your family nest to help you instead. Or the child who had earlier been designated as his or her parents’ agent may run into his or her own financial difficulties; or he or she may get ill, pass away or go through a traumatic divorce. Any of these conditions can lead to a situation in which that child might not be best suited to act on your behalf. That’s why it’s a good idea to update your plan on a regular basis.
3) Your wishes change. Sometimes you just plain and simple change your mind. What scares us are the number of clients we see who think they know what their will or trust says, only to learn that it doesn’t say what they thought it did. Oftentimes, clients will change their minds several times before finalizing their initial estate plan. And, sometimes, what they told their lawyer and signed in their documents isn’t what they remember a year later. Sometimes they plan on changing something with their lawyer, but never get around to actually doing it, mistakenly believingly that they did it. Recent science has shown that memories — even those that seem vivid and clear — are often not accurate. It’s a good practice to visit with your estate planning attorney every year, just to be sure that everything is still in good order.
Some recent changes in the law over the past five to 10 years that might affect your estate plan include:
1) Changes in estate tax exemptions and the introduction of “portability” of estate tax exemption between spouses. If you have less than $5,490,000 and an A-B Trust (sometimes called a marital deduction, bypass or credit shelter trust), there might be better planning options to make sure your heirs get a full “stepped-up” basis for capital gains tax purposes after you and your spouse pass away.
2) Changes in asset protection laws. The state of Hawai‘i now allows married couples to hold property in trust as tenants by the entirety. This is a fantastic way to protect the home against a creditor of one spouse or the other (but not against creditors of both spouses) and still get the benefits that a trust can provide. Hawai‘i also has a domestic asset protection trust law now that lets you put assets into a trust, serve as beneficiary and shield those assets against your creditors.
3) Changes in Medicaid laws and policy. Although the Medicaid laws haven’t changed substantially in the past few years, the policies that the state of Hawai‘i has adopted as its interpretation of those laws (sometimes in extremely absurd ways, in my opinion) have indeed changed. For example, the state is now attempting to recover on Medicaid liens placed against a life estate interest in a Medicaid recipient’s home if the life estate was created after September of 2013. Also, the state has asserted a position that ALL trusts — including irrevocable trusts — will be considered revocable for Hawai‘i Medicaid qualification purposes and, therefore, available resources for the creator of the trust, even if the creator is not a beneficiary of the trust. However, it is unclear whether the state will continue to assert this extremely unreasonable position or back off and take a more reasonable approach.
Regardless of the change in law that is relevant to you, the best way to stay up to date and protected is to revisit your estate plan on a regular basis and revise it accordingly. To facilitate this process, our firm is currently offering an annual maintenance plan for less than the cost of two billable hours of attorney time. If this interests you, please call our office for more information or to set up a free consultation to determine whether your estate plan needs any updates.
© OKURA & ASSOCIATES, 2017
Honolulu Office (808) 593-8885
Hilo Office (808) 935-3344
Ethan R. Okura received his doctor of jurisprudence degree from Columbia University in 2002. He specializes in estate planning to protect assets from nursing home costs, probate, estate taxes and creditors.
This written advice was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations governing tax practice.)
This column is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.
See more articles by Ethan by visiting https://okuralaw.com/blog/