When we work with our clients to put a will in place, execute a power of attorney, create a trust or any estate planning instrument, we include in these legal documents flexibility so they will remain valid working documents for a long period of time. However, life events may necessitate updates to estate planning documents. Here are the top reasons you would consider updating your estate plan:
1. Move to another state. Have an estate planning attorney in your new location update your documents to ensure they comply with the laws in that state. Each state’s laws dictate what estate planning documents need to include and how they need to be signed. In addition, if you move from a state that imposes an estate tax to one that doesn’t, or vice versa, your plan may need to be updated to take into consideration this change in the taxable status of your estate.
2. Change in marital status. A marriage or divorce will require significant changes to your estate plan. If you have recently married, then a new set of gift and estate tax planning opportunities may now be available to you and your new spouse. Or, if you have recently divorced, then your estate plan should be updated to ensure that your former spouse is removed as a beneficiary and fiduciary, including on your life insurance and retirement plans.
3. A change in financial status. If you receive an inheritance, accumulate wealth over time, win the lottery or receive a settlement award, then you’ll need to evaluate if your estate is taxable at both the state and federal levels, and if it is, then explore all of the options for minimizing these taxes. You should also consider funding a revocable trust so that these assets will not need to be probated. Aside from this, you may want to consider a different distribution of your estate from what you had in mind previously. On the other hand, if your estate has declined in value, then you will need to review your plan to ensure that it still makes sense in light of your lower net worth.
4. Having children. If you have children, you will need to name a legal guardian to care for your children in the event of your death or incapacity. You may wish to update assets to name a trust for your minor children as secondary beneficiaries after your spouse. And, once your children have reached adulthood, another update might be in order.
5. Disability of a family member. If you are responsible for the care of a disabled person, whether it be a child is born with special needs or an elderly parent who becomes incapacitated, you may wish to take the extra steps to provide for this loved care in the event you predecease this individual.
6. Individuals you have named as beneficiaries or fiduciaries have life changing events. If your children were minors when you initially set up your plan, then as they get older you may want to consider whether they are ready to be named as your fiduciaries—personal representatives in your will, agent under your health care proxy or durable power of attorney, etc. If a beneficiary or fiduciary predeceases you, moves away or you simply lose touch with them, then you will need to reevaluate your plan to ensure that your property is still going where you want it to go and that you have named the right fiduciaries.
Barring a major life change, we recommend you review estate planning documents every three to five years to ensure your wishes will be carried out and there have been no changes in the law that might affect your plan. Doing so will assure your peace of mind.