Top 10 Estate Planning Mistakes: 3. Treating Your Estate Plan Like a Ronco Product

Your estate plan is not like a chicken rotisserie cooker that you can "set and forget." Estate planning documents should be reviewed and revised after a marriage, divorce, the birth or adoption of a child, the death of a beneficiary, the receipt of an inheritance, and after any other significant change in family structure or personal finances. Beneficiary designations on IRAs, life insurance, and other types of assets that allow for beneficiaries to be named must be kept up to date as well. It is a common misconception that the terms of a will "trump" beneficiary designations on such assets. These assets will be distributed to the beneficiaries named on them, and not in accordance with the terms of your will.

There has never been a more important time to review your "A-B trust." These trusts are designed to allow married people to take full advantage of both of their exemptions from federal estate tax. Many A-B trusts in existence now were drafted when the federal estate tax exemption amount was much lower than it is today . (This is the amount that an individual can pass to beneficiaries other than his or her spouse free of estate tax.)

With an A-B trust arrangement, when the first spouse dies, his or her assets are divided between the A trust, which benefits the surviving spouse, and the B trust, which is for other beneficiaries, typically children. Some A-B trusts allocate  the full estate tax exemption amount to the B trust. Given that the estate tax exemption is now $5 million, trusts that allocate the estate tax exemption amount to the B trust may place more assets than desired beyond the reach of the surviving spouse. These trusts are usually drafted so that the surviving spouse is entitled to income and sometimes even principal from the B trust. Nevertheless, these distributions may not be sufficient to allow for the lifestyle envisioned for the surviving spouse when the A-B trust was created.