Time to Review Estate Plans

The approach of a new year is also a good time to review your will and other estate planning arrangements – especially in light of changed economic conditions. Take the case of Meredith, who last updated her estate plan in mid-2007. According to that plan, her three children would receive the following:

• Suzanne, her oldest, was left a $100,000 stock portfolio (2007 value) under Meredith’s will;
• Meredith’s son, Tim, was named beneficiary of a $100,000 IRA (2007 value);
• Olivia, the youngest, is beneficiary of a $100,000 life insurance policy.

Meredith thought she was treating all the children equally, but today the stock portfolio is worth only $83,000. The $100,000 IRA has declined to $91,000, and Meredith has also learned that Tim will have to pay income tax on everything he receives from the account – which is not true of the other children’s inheritances. Olivia comes out the best; the $100,000 life insurance policy maintains its value, although the death benefit will never grow in value, either.

Meredith decides that it might be better to arrange her estate plan so that each child receives a proportionate share of all her assets, which will evenly divide the risks and rewards that each investment poses.

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