If you are anything like most people, getting an estate plan in place is just one more box to check on the never-ending list of things that adults are supposed to do. Once complete, there is generally a sigh of relief and then you move onto the next thing. Very few people put a lot of thought into the upkeep of their legal documents after they are finished, but that may be a mistake.
Estate plans are living documents that are designed to be updated and changed as your life changes. Making sure they reflect your current and expected circumstances is one of the best ways to ensure your loved ones have a clear idea of how you want your assets distributed. Without updates, your estate plan may lack the information needed for a smooth transition.
Many families gather during the holiday season, making this a great time to review your estate plan and identify any updates that need to be made.
To help you recognize some of the main reasons to update your estate plan, here are five not-so-surprising reasons why these crucial documents demand your attention.
Evolving Family Dynamics Can Alter Your Estate Plan
Families grow and transform over time. New members join through marriage, and children or grandchildren may come into your life. Conversely, relationships might change, leading to estrangement or divorce. These shifts in family dynamics could significantly impact how you want your assets to be distributed. Updating your will or trust ensures that your wishes reflect these changes, safeguarding your loved ones’ future.
In practical terms, you do not want to forget to include a child that was born after your documents were created, and you may not want a former spouse to receive an inheritance.
Your children may have grown up since your last estate plan was written and may need to be added as agents, or maybe your parents have aged and are no longer able to act as a guardian for your minor children. Making these changes now minimizes confusion and hurt feelings later.
Keeping both your beneficiaries and agents/representatives/trustees updated is key to a smooth transition.
Asset Accumulation or Changes
As we progress in life, so does our financial situation. You might acquire new assets, such as property, investments, or businesses. Likewise, circumstances might lead to the sale or loss of certain assets. To ensure that your estate plan accurately represents your current wealth distribution, revisiting and updating your will or trust is essential.
It would be unfortunate to leave a house you do not own to your child (meaning there is nothing to leave them), or to forget to change your beneficiaries on your retirement accounts so your current spouse has no resources in retirement.
Updating your estate plan is more than just updating your will or trust, it is also taking a look at all the accounts that need to be distributed after you are gone.
Relocation and Legal Jurisdiction
Moving to a new state or country can significantly impact the legal requirements of your estate plan. Different regions have varying laws regarding wills and trusts. Reviewing and updating your documents in alignment with the legal jurisdiction of your current residence ensures that they remain legally valid and enforceable.
It is also important to include assets that are not in your same state/region in your estate plan. Sometimes this looks like the family summer cabin, a car parked in your uncle’s barn, or maybe a life insurance plan your grandparents set up for you when you were a baby. If you do not identify all of these assets and then decide how you want them distributed, your representatives will have to do it after you are gone, and that means they will spend a lot of time gathering everything and then figuring out how to divide it up.
A good way to help you through this process is to keep a box or envelope that has copies of bank statements, titles, and deeds in it. If, over time, you realize those items are not included in your estate plan, it may be time to get it updated.
Changes in Health and Incapacity
Life is unpredictable, and health challenges may arise unexpectedly. If you or a family member experiences a decline in health or becomes incapacitated, revisiting your estate plan becomes crucial.
We always include powers of attorney with our estate plans, but it is a good idea to get them updated every few years. Many banks and doctors want to see current powers of attorney to be sure they are working with the current agents with current authority. A good rule of thumb is to get them updated about every 3 years.
Also, if you have a trust, your incapacity may trigger your successor trustee to step up to act on your behalf. It is important that you have reviewed your successor trustee list and it is current for your wishes and their abilities.
Legal and Tax Changes
Laws governing estate planning, taxes, and probate can undergo revisions. These legal modifications might impact the efficacy of your will or trust. Staying informed about these changes and updating your estate plan accordingly can optimize tax benefits and ensure compliance with the current legal framework.
These changes may also inspire you to change the type of estate plan you have. For example, if probate becomes more costly or time consuming, a trust may be a better option than it was before. You may want to update your beneficiaries on your bank, retirement, and investment accounts to maximize current tax benefits.
Next Steps
Life is a journey marked by constant change. Your estate plan, designed to protect your legacy and loved ones, should adapt to these changes. Regularly reviews and updates to these documents ensures that your wishes are accurately reflected and legally binding. Whether you have a chance to talk to your family during the holidays or tackle this project in the upcoming year, we suggest that you consult with a legal professional who is experienced in estate planning to provide you with guidance in navigating these updates, ensuring a secure future for your loved ones. If you are in Idaho and would like our assistance, we would be happy to help!
P.S. If you would like some ideas about how to talk to your family about your estate plan, The American College of Trust and Estate Counsel has a great article about talking to your family and another one about talking to your parents.
