As we enter a new decade, we gather to set our goals for the year and reflect on the progress made in the last 12 months. Just as it is time for a little spring cleaning, it might also be the perfect time of the year to revisit a crucial element of your family’s financial future: your estate plan.
Contrary to what you might have thought, an estate plan is not set in stone. Unlike a deed, it is not a document you just photocopy and seal away. Every few years, it is important to set aside time to revisit and review your estate plan.
There are no exact guidelines for how often you should revisit your estate plan, but it is a good rule of thumb to go over your paperwork at least once every three to five years.
This isn’t because there’s a limit on how long these documents are valid. It’s because the circumstances surrounding the creating of these documents can change. If the situation and context surrounding your estate plan is fluid, then it’s unknowable in the long term. In other, more succinct terms: life can throw curve balls. When it does, it is time to go over your priorities once more.
Revisit Your Estate Plan Regularly
Above all else, it is important to remind yourself to check your documents regularly. This is because the fewest among us know exactly what we intended when we first drafted an estate planning document. Our priorities may change over the years. This is especially true as families grow and shrink or change completely. Even if you do not intend to change anything, it can still be a good idea to remind yourself of the contents of your estate plan.
It bears mentioning that there is more to reviewing an estate plan than simply going over the beneficiary list within a last will and testament. Estate plans can contain trust documents, living wills, power of attorney documents, advance health directives, and more.
They contain the instructions with which your family will navigate your passing. And through which you can ensure a decent and dignified death for yourself. From which comes the swift and rightful distribution of your financial legacy to your loved ones. If you have not set up a comprehensive estate plan yet, then consider building one over the years. It can help simplify the process of getting your assets to your loved ones after your passing. Also, it can help you prepare for any number of aberrant complications during your last years.
Know When a Review Is Due
When you sit down to go and revisit your estate planning documents, the first thing you should do is call your estate planning attorney. Not only will they have a record of your intentions at the time, but they can help you sort out any potential changes or amendments.
Some of the things you will want to go over include:
- Your beneficiaries.
- Your total assets covered by trusts or your will (to ensure that additions made over the years are covered in your estate plan).
- Any recent changes to federal and state estate tax laws (and tax law in general).
- A new evaluation of your assets (particularly for assets that change in value over time).
- The names and statuses of your trustees and agents (in any power of attorney documents you have).
- Your designated executor for the will, and the state of your family.
Aside from revisiting your estate plan every few years, it is also pertinent to go over your estate plan whenever something major occurs. Life-changing events can drastically alter your priorities, such as:
When a Beneficiary Dies
When a loved one passes away, you may have to adjust your will or other estate planning documents to reflect that they are no longer alive. Worst case scenario, their share of your estate might pass on to their estate, which would then rely on that beneficiary’s estate planning documents. Alternatively, depending on how your estate planning is set up, it could go directly to their next of kin, or to an individual or individuals you would not want to have receive the share. That said, it is good idea to look at your estate plan to see who would be entitled to this share, and possibly update your plan to address this.
When You Are Divorced/Widowed
While you cannot bequeath anything to a deceased spouse, old estate planning documents may lead you to accidentally distribute a portion of your estate to your ex. This can be frustrating and difficult to resolve during the probate process, but not updating your estate plan to reflect your new marital status may also endanger the inheritance options for your children from an older marriage.
When You Remarry
If you have a blended family, with children and stepchildren, or have both children and stepchildren as well as a new spouse, these major changes need to be reflected properly in your estate plan.
Intestacy law dictates how assets are distributed if you pass away without a plan. If your plan only mentions biological children or specific individuals, your stepchildren will not have any inheritance rights.
When You Meet Someone Special
Marriage is not the only occasion that calls for a change in your estate plan. Two people can love one another and never have to go through the process of getting married. If you do not get legally married, you must specifically note how you wish to split your assets upon death. Your partner will generally have no inherent right to any of your property in California.
When Moving to a New State
If you decide to pack up and move somewhere else, it’s important to hire a local estate planning attorney to help you review your estate planning documents and ensure that everything is in accordance with the state probate code, and other laws. Estate planning laws differ slightly from state to state. In some cases, it’s important to go to an experienced local professional who can help you sort out the necessary changes.
When the Law Changes
Finally, is the need to amend your estate plan when laws change. The estate tax laws reflect how large an estate can be before it must pay a significant tax during the probate process. Currently, California has no state estate tax. The federal estate tax exemption limit is $11.58 million per individual in 2020, and double that for spouses.
Some estates are purposefully built to avoid a total value beyond the exemption limit at the date of death. However, because these limits change nearly every year, it can be within your best interest to regularly amend your estate plan to take advantage of these changes.
Estate Plans Are Flexible
Remember – these documents are not set in stone. Some estate plans are nearly impossible to amend. Most are designed to change over the years to adjust to your needs whenever they are reviewed.
Your estate plan should reflect who you are now, and what you need to worry about on this given day. Not who you will be in 20, 30, or 50 years. Or whenever you believe you might find yourself on a death bed. We cannot predict how life ends, or what the next few years will bring. Plan for the now but remember to come back for the future.