8 Reasons to Revise Your Estate Plan Today - Forbes
If you have an estate plan in place, you’re in the minority: 51% of Americans age 55 to 64 don’t even have a Will, according to this survey.
But having an estate plan doesn’t mean that the job of protecting your family’s future (and present) ends. Chances are your personal and financial situation will change as time passes. The next step is to periodically review your estate to make sure it reflects your current goals and requirements.
Even if your estate plan was crafted by a skilled and experienced estate planning attorney, you’ll want to revise it if:
You get married.
Marriage (or re-marriage) does not automatically change the provisions of your will or trust and will not necessarily provide for your new spouse. While marriage does give each spouse some rights in each other’s property, you should change your plan to ensure it reflects your new goals, both individually and as a couple. Say you and your new spouse both have children from a previous relationship: revising your estate plan could be an essential step in navigating the complexities of providing for children in blended families.
- You get divorced. During your marriage one of the goals of your estate plan was to provide for your spouse. After a divorce those goals probably change — and so should your estate plan. Once your divorce is finalized, revise your plan as quickly as possible to reflect your new goals and intentions.
- You have or adopt a child. If you don’t have children it’s likely your estate plan distributes your assets to your spouse and/or to charitable organizations. Once you have a child you’ll probably want your son or daughter to be the recipient of your estate. (In addition to providing for your child’s financial future, you may also wish to appoint a legal guardian for your child in the event you and your spouse die or are incapacitated.)
- You get hurt or injured. If you or one of your family members becomes seriously ill, you may want to consider changing your estate plan to reflect their increased needs. For example, if a loved one has special needs you can leave assets in a trust that will not disqualify him or her from receiving government benefits. Or you may wish to shift the distribution of assets to help provide for his or her increased financial requirements.
You change your plans.
Over time your goals and intentions naturally change. You may decide to select a different trustee for your estate. You may wish to distribute assets differently. You may wish to include your grandchildren in your plan. The possibilities are endless. Your estate plan should reflect your current intentions, not the goals you had five years ago.
- You inherit. If you or your spouse receive or expect to receive a significant inheritance, there may be new opportunities to reduce taxes or provide creditor protection. The increased value of your estate may also prompt you to change how your assets will be distributed when you pass away.
- You buy or sell a business. A major change in the nature or extent of your assets may create different estate planning opportunities. For example, if you purchase a business you may want to create a succession plan. If you sell your business the capital you receive may require a different plan for asset distribution and reducing the tax burden your heirs may someday face. Or, if you’ve gotten married or had children, new beneficiary designations for life insurance or retirement plans should be coordinated with the estate plan. (For example, keep in mind that your 401(k) beneficiary designation trumps any designations made in your estate plan.)
You move to another state.
Estate planning documents are typically valid from one jurisdiction to another, but each state has its own regulations and requirements. For example, if you move from a separate property state (like Virginia) to a community property state (like California) you might find it advantageous to convert your separate property to community property to take advantage of favorable income tax treatment.
It’s likely you won’t even be aware of changes that may affect your estate plan. There are a wide variety of personal and financial reasons to review your trust on a regular basis. To give you a sense of how dramatic the impact can be, let’s take a closer look at two specific situations and how changes to a tax law or to your financial position can make a trust review essential
What an Up-to-Date Estate Plan Should Cover
Even if your personal or financial situation hasn’t changed and changes to federal or state laws have not impacted your estate plan, it’s a good idea to periodically review your plan with a qualified estate planning attorney to ensure your intentions will be carried out and your plan will provide for the needs of your beneficiaries. A comprehensive estate plan should:
- Designate who you wish to manage your affairs if you become disabled, incapacitated, or pass away. (A well-structured trust clearly defines the meaning of “incapacity” – trusts are often contested when an insufficient definition of incapacity exists.)
- Plan effectively for the demands on your estate if you must enter a nursing home – and for the impact of Medicaid on your financial needs.
- Avoid probate, both during your lifetime and when you pass away. (Probate costs can be significant, and the probate process can be lengthy and time-consuming.)
- Protect children from your prior marriage in case you pass away before your present spouse.
- Protect assets inherited by your heirs from lawsuits, divorces, and other claims against them.
- Impose financial discipline upon children and grandchildren who may be too young or inexperienced to effectively manage money.
- Provide children or grandchildren with special needs or in special circumstances.
- Ensure that a specific portion of your estate goes to grandchildren, charities, or other persons or organizations than your direct heirs.
- Protect a portion of your estate if you pass away and your surviving spouse remarries.
- Address the different needs of each of your children if applicable.
- Prevent (or at least discourage) challenges to your estate plan.
- Provide for the education of children and grandchildren; many trusts specify that a portion of the funds must be used to defray college tuition costs, for example.
- Plan a family estate plan for blended families (families containing children from previous marriages) that ensures all children are provided for according to your desires and intentions.
- If major personal or financial events or changes occur (like marriage, the birth of a child, divorce, or selling or buying a business) review your plan with an experienced estate planning attorney to ensure those changes are incorporated. If your personal situation hasn’t changed, periodically perform a review with your attorney periodically to assess the impact of federal or state laws on the provisions of your trust.
Life isn’t a one-time event, and neither is estate planning. Make sure your plan changes as your life changes.
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