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Update Your Estate Plan: Navigating Life’s Changes

When drafting a will and other estate planning documents, note that you probably should revisit them many times before they are needed.  Even if you have experienced no major life events recently, the people you previously chose to handle certain duties may no longer be your best option.  Thus, it is crucial to update your estate plan regularly. This article will guide you through revising your estate plan to reflect life’s inevitable changes.

Is it Important to Update Your Estate Plan?

Understanding Estate Plan Updates: An estate plan is more than a set of documents. It is a roadmap for your family’s future. However, as your life evolves, so should your estate plan. Regular reviews ensure that your estate plan aligns with your current circumstances and desires.

Life Changes and Your Estate Plan: Major life events, such as marriage, divorce, the birth of a new child, or even moving to a new state, necessitate reevaluating your estate plan. These events can significantly impact how you want your assets distributed and who you choose as beneficiaries or executors.

How Often to Review Your Estate Plan?

Regular Review is Key: Professionals often recommend reviewing your estate plan every three to five years. However, if you experience any major life change, it’s wise to revisit your plan sooner.

Changes in Law and Circumstances: Laws governing estates and taxes can change over time. Staying abreast of these changes and updating your plan accordingly is crucial to safeguarding your estate and beneficiaries.

What Triggers an Estate Plan Update?

Major Life Events: Significant life events like marriage, divorce, the birth of a new child or grandchild, or the death of a beneficiary are common reasons to update your estate plan. These events can drastically alter your estate planning needs.

Financial Changes: A significant change in assets, whether an increase or decrease, can impact your estate planning strategies. This might include changes in investments, real estate holdings, or business interests.

Updating Beneficiary Designations

Reviewing Beneficiary Choices: Beneficiary designations on life insurance policies, retirement plans and other financial accounts are crucial to your estate plan. Reviewing and updating these designations to reflect your current wishes is essential.

Considerations for New Family Members: Adding a new child or grandchild to your family is a joyous occasion that should prompt a review of your beneficiary designations. This ensures that they are included in your estate plan.

The Role of Trusts in Estate Planning

Understanding Living Trusts: A living trust can be vital to an estate plan, offering benefits like avoiding probate and maintaining privacy. Reviewing and possibly revising your trust to accommodate changes in your life is important.

Trustees and Successor Trustees: Choosing the right trustee and successor trustee is critical. Life changes might lead you to reconsider who you’ve appointed in these roles, ensuring that they align with your current circumstances.

Addressing Changes in State Laws

Moving to a New State: If you’ve moved to another state, updating your estate plan to comply with the new state’s laws is imperative. Estate and tax laws vary significantly from state to state.

State-Specific Considerations: Each state has unique provisions regarding powers of attorney, healthcare directives and other estate planning documents. A review with an estate planning attorney familiar with local laws is essential.

How to Update Your Estate Plan

Working with Professionals: Updating your estate plan can be complex. Working with an experienced estate planning attorney or financial planner ensures that your plan is comprehensive, up to date and reflects your wishes.

Review and Revise Documents: Revisiting your estate plan involves reviewing all documents, including wills, trusts, powers of attorney and healthcare directives. Revise your documents as soon as possible after a major life change.

Special Considerations for Business Owners

Business Succession Planning: For business owners, updating your estate plan might include reviewing your business succession plan. Ensuring a smooth business transition is a crucial part of estate planning.

Tax Planning and Asset Protection: Changes in your business situation might also impact your estate taxes and asset protection strategies. Regularly updating your estate plan can help minimize tax liabilities and protect assets.

Conclusion: The Importance of Keeping Your Estate Plan Current

Your estate plan is a dynamic document that should evolve as your life does. Regular updates ensure that your wishes are accurately reflected, and your loved ones are protected. Remember, an outdated estate plan can be as ineffective as having no plan.

If you’re ready to update your estate plan or have questions about how recent life changes might impact your estate, don’t hesitate to reach out. Schedule a consultation with us today to ensure that your estate plan meets your current needs and secures your legacy for the future.

When Should You Update Your Estate Plan?

We know we need to see our doctor for annual checkups and see the dentist every six months, not to mention getting a good night’s sleep, brushing and flossing our teeth. In the same way, your estate plan needs regular maintenance, according to an article from The Street, which asks, “When Is It Time to Update Your Estate Plan?”

Far too often, estate plans are created with the best intentions and then lie dormant, in many cases, for decades. Provisions no longer make sense, or people in key roles, like executors, either move away or die.

Failing to update an estate plan can lead to a beloved child being disinherited or an animal companion ending up in a shelter.

This is an easy problem to solve. However, it requires taking action. Scanning your estate plan once a year won’t take long. However, when certain events occur, it’s time to bring all your estate planning documents to an estate planning attorney’s office.

Here are a few trigger events when you may want to make changes:

Welcoming a new child into the family. Wills and trusts often contemplate future children. However, when the children arrive, you’ll need to update wills, trusts and beneficiary designations. Life insurance policies, investment accounts and retirement accounts allow you to name a beneficiary, and the proceeds from these accounts go directly to the beneficiaries, bypassing probate.

If no beneficiary is named or cannot be located, the asset usually goes back into the estate, meaning it goes through probate and there may be tax liabilities.

Charitable giving goals often change over time. An organization with great personal meaning in your twenties may be less important or may have closed. If you’ve become involved with a charitable mission and want to leave assets to the organization, you’ll want to create a charitable bequest in your will or trust. Those changes need to be reflected in your estate plan.

People’s ability to serve in fiduciary roles may have changed. If the people you assigned certain roles to—like trustees, executors, agents, or the guardian named for minor children—may no longer be suitable for the role. The person you selected to serve as a guardian for minor children may not be available or willing to manage adolescents. If your trustees are over 70, you may want to name an adult child to serve in this role.

Reviewing insurance policies needs to be done regularly. In some cases, the value of life insurance proceeds may be subject to estate tax. Proper planning should be able to avoid this by making certain the policy is not included in your taxable estate.

If you are considering taking out a new life insurance policy, revisit your existing plans with your estate planning attorney. It may make sense for you to create an insurance trust, which allows you to exempt certain assets from your taxable estate.

Are pets an important part of your life? If so, you may want to make plans for who should take care of your pet if you pass away. In many cases, a pet trust works to name a trustee to manage funds for the pet’s care and formally outlines how you want your pet to be cared for.

Reviewing your estate plan every three to five years with your estate planning attorney or whenever a significant life event occurs will ensure that your wishes are followed.

Reference: The Street (Oct. 30, 2023) “When Is It Time to Update Your Estate Plan?”

Estate Planning in Seven Steps

From defining financial objectives and understanding legal issues to safeguarding assets and establishing directives, every step in the creation of an estate plan is a brushstroke in the painting of your personal legacy. A recent article from Market Business News, “Crafting Your Legacy: 7 Steps in the Estate Planning Process,” describes the process of creating what is essentially a testament to protect loved ones.

Create an inventory of assets. You’ll need to be meticulous about this to ensure that all your assets are accounted for. This includes properties, investment accounts, items of value and sentimental possessions. It should include detailed descriptions and appraisals. This forms the foundation of your estate plan.

Consider your family’s needs after your death. Anticipate your family’s financial, practical, and emotional needs. Consider things like educational expenses, healthcare costs, ongoing support for basics, and, depending on your situation, recreational activities. Address this concern in your estate plan, so your family will have a secure foundation after your passing.

Select beneficiaries. This is simple in some cases and more complicated in others. You may have a traditional family or one including non-family members who are like family to you. Are there charitable concerns you want to address?

How do you want your estate divided? Be specific to avoid confusion and ensure that assets are distributed according to your intentions. Language needs to be specific and clear, with no room for ambiguity.

Store documents properly. Safeguard estate planning documents, which include your will, Power of Attorney, Health Care Power of Attorney, Living Will and others, in a secure location, like a fire and water-proof home safe. Do not put them in a bank safe deposit box, as the bank may seal the box upon your death and not allow representatives to access the box’s contents. Talk with your estate planning attorney about their recommendations.

Update your estate plan on a regular basis. Life changes, and so should your estate plan. It should be reviewed every three to five years or whenever there is a life event, including marriage, divorce, birth, or changes in your financial situation. Keeping an estate plan updated ensures that it remains relevant to your life.

Seek help from an experienced estate planning attorney. An estate planning attorney will help you navigate the complexities of legal documentation, tax implications and probate. You’ll want to be sure that your estate plan aligns with state laws. The knowledge of an estate planning attorney will provide you with peace of mind, knowing you’ve done the right thing to protect your family and ensure your legacy.

Reference: Market Business News (Oct. 28, 2023) “Crafting Your Legacy: 7 Steps in the Estate Planning Process”

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