Today, a 65-year-old man has a life expectancy of 84 while a 65-year-old woman has a life expectancy of nearly 87, according to the Social Security Administration. That increased longevity has changed all kinds of financial planning, such as retirement calculations and long-term care insurance costs. But its impact on trusts and estates is only just beginning to be seen.
With people routinely living into their 80s and 90s, many children do not receive an inheritance from their parents until they are in their 60s and 70s.
This causes many problems with estates, especially with trusts set up decades ago, as Barron’s reports in an article titled “When Longevity Upends Trusts.”
The biggest issue is that the children are not receiving the inheritances when they need them the most. Instead, they get the inheritances when they’ve already reared their own families and perhaps even retired.
This can cause family tensions.
One solution to the problem is for the parents to make more use of the gift tax exemption and give to their children when the money is needed. However, with parents living longer it can be difficult to judge just how much money they need to keep for their own expenses.
Consequently, estate plans need to take into account expected lifetimes.
If your estate plan contains a trust created decades ago, you should contact an experienced estate planning attorney. You may want to revisit your estate plan to account for the expected increase in your longevity.
Reference: Barron’s (November 29, 2014) “When Longevity Upends Trusts“