Updating an estate plan can sometimes seem like a grim task. It involves facing your mortality, working with delicate family relationships, and sometimes making difficult decisions that can affect both you and your loved ones. Reviewing estate plans is not usually how people choose to spend their free time. That being said, it is also vitally important, and we recommend you do so every few years.
Keeping your estate plan up to date can avoid the costly and time-consuming probate process. It can also ensure that your assets are distributed as you see fit and assist your beneficiaries in a smooth financial transition. If it has been some time since you established your estate planning documents, here are some reasons to revisit it so that all your planning and work is not wasted when these documents are needed.
Some people are prompted to draw up end of life documents and estate plans when they become parents. Your assets may well have changed since then. It is vital to ensure to that any newly acquired real property is titled in the name of your trust, if you wish the trust to control it. This is a mistake many people make. Financial assets also need to be addressed. If you opened up a new bank account, is the account owned by your trust? Or is the trust designated as a pay on death beneficiary? Or do you have individuals designated as beneficiaries? If you have a 401k or other supplemented retirement plan, it’s imperative to ensure that your documentation is designating the correct person or people as the beneficiary or beneficiaries, and that contact information is current. All of these are important questions to address.
Additionally, assets are not limited to financial assets or money in the bank. Assets include personal items, property, and real estate. If you have purchased a time share or a part-time retirement residence, these also count as assets. On the other hand, your assets may have decreased. You may have already distributed vacation property to children or a trust, or a drop in the stock market may have completely changed your portfolio’s value. In addition, you might have sold a family business or started a new one in your retirement. Or, new federal or state tax laws may prompt a change in investment or estate planning strategy.
With changes in assets, it may be very important to revisit who you are naming as your beneficiaries.
Updating Guardians Appointments & Executors
Those who take on estate planning upon the arrival of a child usually think a great deal about who they will nominate as the baby’s legal guardian. However, if that baby is now a college student, or you are caring for an incapacitated parent instead of a baby, it’s time to update your estate planning to reflect these new realities. Especially if you and your spouse have created and funded a trust, deciding who is best suited to act as trustee is a question which usually requires revisiting. For example, if you have named your parents as legal guardians, trustees, or executors, it might now be time to transfer such designation to adult children.
Changes in Mind & Family Structure
Modern families are often in flux. Marriage, divorces, blending families, and the births of children can all call for changes in estate planning. The arrival of grandchildren can also prompt a redistribution of assets. In addition, children or parents may have become incapacitated or require special care since you drafted the original documents. There may have been a death in the family or a remarriage. These all require attention.
Revisiting wills and estate documents from time to time is also important as time passes and relationships change. Perhaps you have mended a rupture with a family member you’d now like to include as a beneficiary, or you’ve left some stock to an alma mater that has since taken a series of political stances which conflict with your values. These changes usually don’t require a lot of time, but they usually aren’t at the forefront of your mind as you make slow decisions or come to gradual conclusions.
Whatever these changes might be, it’s important to communicate them to the entire family. You aren’t legally required to, but doing so now eliminates future miscommunications and arguments. Alerting everyone to such alterations also allows you to explain your reasoning and answer any questions of your beneficiaries.
Moving to Another State
If you’ve recently moved to another state, it is a good idea to consult with a legal professional regarding any potential updates that should be addressed.
Some matters in the United States are governed nationally at the federal level, while others are directed by state law. Matters of wills, estates, and probate are all managed at the state level. So, if you undertook your estate planning while living in Maine and you now make your permanent residence in Louisiana, it’s best to consult with a legal professional. Many states do recognize living trusts and wills that were validly executed in another state, but there may be something specific to your new state that would be better off addressed than ignored.
Making these updates might well be quite simple; other times, they are more complex. Differences between state laws can vary widely. One state might have completely different inheritance laws, not to mention taxes, than another.
While you are checking on your estate plans, this is also an excellent time to check on the viability of your end-of-life medical documents, including living wills and advance medical directives. These documents particularly can be very state specific. Perhaps your mind has even changed regarding your wishes regarding your medical care in the event of an emergency. Just a few minutes ensuring that all these important documents are still valid can spare your family legal entanglements and potential conflicts.
It’s generally a good idea to review and update estate planning decisions and end of life documents every three years or so, or every time you experience a life change. Even a happy event such as full payment of student loans or a mortgage is an indicator that you should consult with a legal professional about needed changes. Once you are sure your documentation is updated, ensure family and friends know where to find the original.