When to Update Your Estate Plan

If you already have an estate plan, you’re ahead of the majority of Americans. According to a survey by Caring.com, more than half of people don’t have a will or living trust. Even if you have your estate documents in order, you’re not done.

Chances are you’re still many years away from needing to put your end-of-life plan into motion. There are still many changes in your life that need to be reflected by updating your documents. It’s an essential part of making sure everything is in order for your family and heirs.

Having an updated estate plan not only takes care of your loved ones financially but it ensures everyone knows your last wishes. It can save a lot of emotional stress after you’re gone and assures your family that they’re handling your estate in the way you would like it handled.

But what should you update and how often? How do you know if there is an essential piece that you’re missing from your estate plan? Let’s dive in.

What You Should Update

What you need to update depends on what you already have as part of your estate plan. The more comprehensive the plan, the more documents will need to be reviewed and updated. While you should certainly review your will, that is not the only thing that should be on your list.

There are many different documents that can comprise your estate plan, depending on the complexity and size of your estate. Some of these documents include your will, a living will, a revocable living trust, power of attorney, a digital estate plan, and more.

Your estate can also include a variety of financials such as a life insurance policy, retirement plans as well as business plans if you own a business. If your will is the only piece of your estate plan you have in place right now, you may want to consider adding on to it.

Talk to an estate planning attorney or a qualified financial advisor about what makes sense for your particular estate. Consider what you would like to happen with all of your property and money, and how you want it handled.

Use that to create an end-of-life plan that addresses all of your wishes and ensures your heirs will know what to do once you pass away.

When You Should Update Your Estate Plan

It’s recommended that you update your estate plan documents every three to five years or after any major life changes. If you have many different documents in your estate plan, getting it all updated can be quite an undertaking.

To make the process easier, it’s always best to update all necessary documents as things change. This way you only revise what needs to be changed rather than going through everything and making lots of updates every few years.

However, if you haven’t updated your estate plan in a while, it may be time to just go for it. Sit down and review everything that is part of your end-of-life plan to ensure it’s current. In addition, do an audit to make sure that you have all necessary documents as part of your estate plan.

If you find any holes, talk to an estate planning attorney about how you can fill in the gaps and protect your assets. This can be especially important if there are multiple interests that could cause conflicts with the distribution of your assets.

As you look at your estate plan, you want to make sure your intentions are still the same. Are the right people included? Are all major changes reflected? In addition, here are the most common reasons to review and update your estate plan:

Marriage and Divorce

Major changes to your marital status are an important reason to review your estate plan. Whether you’ve just tied the knot or parted ways with your spouse, each one is a major change to your family’s dynamics.

This kind of change should be a trigger for reviewing your documents. Make sure your new spouse is included in your estate plan and your ex-spouse is removed from it. Do this as soon as possible after your divorce to ensure your money is in line with your wishes.

There is no legal requirement to change your estate plan after a divorce or marriage. You don’t have to remove or add a spouse but it would make things easier down the road. In addition, you don’t have to be married to your partner to add him or her to your documents.

If you and your partner are not legally married, he or she may not get anything from your estate upon your death. This is true both in the case of a domestic partnership or a common law marriage.

To ensure your partner is taken care of in the event of your death, the best thing you can do is add them to your estate planning documents. This way there is no question that you wanted part of your money or property to go to your partner.

Children

When you have a new baby, it’s good to add them to your estate plan. You want to make sure they’re taken care of in case something happens to you and/or your spouse. The best way to do that is to update your documents with the new addition to your family.

If you’ve remarried and had children from your first and second marriage, you will want to address this in your estate plan. This also goes for any stepchildren that you would like to include in the distribution of your estate.

Stepchildren are not usually included in your estate plan, however biological and adopted children are part of it. If you want to disinherit a child or a spouse, this will need to be spelled out in your plan as well.

Provided this is something you would like to pursue, make sure you talk to an estate planning attorney. There are laws that govern inheritance in every state so you want all of your documents to be legally binding if your wish is to disinherit a member of your family.

Ensure that there is a guardian named for your children if you were to pass away. Every few years, look at who you’ve named as the guardian for your kids in case you pass away to make sure you still want this person to fill the role.

If your children have reached the age of 18 or the age of majority in your state, they no longer need to have a guardian or personal representative. If there have been any changes to the guardians, personal representatives or trustees, make sure those are reflected in your plan.

Changes to Beneficiaries

If you want to add or remove beneficiaries, review all documents within your estate plan to ensure the changes are made across the board. Even if you set up the beneficiaries with your retirement plan provider, you need to ensure that the rest of your estate plan aligns with your wishes.

If any of your beneficiaries have passed away, you need to update all documents to reflect the changes. Look at the distribution of your assets and decide how to revise it based on the current beneficiaries.

This is especially important if you have beneficiaries who need special care. Make sure your estate documents outline how to care for any beneficiaries who require special care or have special needs.

Tax Changes

Unfortunately, the tax law is constantly changing so this is something you will need to take into account with estate planning. Also, if you move from one state to another or even one country to another, make sure your documents follow all local and state laws.

Consult with a local estate planning attorney who can go over everything with you and advise you on any changes you will need to make. Keep in close contact with your attorney so you can check in periodically as the laws change.

Depending on the size of your estate, it may make sense to set up a trust to shield some of your assets from taxes. In 2019, if your estate will exceed $11.4 million or if your combined estate with your spouse exceeds $22.4 million, you may have federal estate taxes due. This is something you will want to discuss with your attorney and financial advisor.

Other Considerations

Here are some other considerations as you’re looking at updating your estate plan. Consider updating your estate plan in any of these situations:

• Do you want to make changes to your trust? If you have a revocable living trust, you should review it periodically to ensure you still want to keep the same person as the trustee. Consider adding a successor trustee or a substitute trustee. Regularly check your trustee list to make sure it’s up-to-date and accurate.
• Do you want to make changes to your power of attorney? No matter the type of power of attorney you have, it’s important to check it regularly to ensure that your wishes are reflected. This includes both durable power of attorney and healthcare power of attorney. You can always revoke any of these and name a new person to have that power on your behalf.
• Do you have a living will? If you have a living will already, make sure it’s up-to-date and it contains everything you want outlined clearly. If you don’t have one, get it set up as soon as possible. If you’ve changed your mind, make sure to update the document with the changes.
• Do you have a business plan in place? If you own a business, you need a succession plan to ensure it continues running after your death, if that is your wish. If you would prefer to have the business sold when you pass away, you need to outline that as well.
• Have you bought or sold any property? If you’ve bought or sold a second residence or other property, make sure the changes are reflected in your estate plan. Also, if you own homes, investment property or tangible property in two or more different states, consult with an estate planning attorney.

Why You Should Update Your Estate Plan

As you’ve gone through each section, you probably have a good idea as to why it’s important to keep your estate plan up-to-date at all times. This way you can ensure your wishes are carried out once you pass away.

Make sure you update all documents soon after any major life change - both positive and negative. Also, if you change your mind about any of the documents within your estate plan, those will need to be updated as soon as possible.

An estate planning attorney can help you draft and also update any documents. This ensures everything is legally binding and reflects your wishes. Don’t count on telling your family and friends about your wishes - just include them in your estate plan and make them legal.

If you pass away before your estate plan documents are updated, you risk your assets being distributed in a way that you wouldn’t want. For example, if you get a divorce and pass away before your will is updated, your ex-wife may be entitled to some of your assets.

This is why it’s important to make big changes as they happen rather than waiting to update your plan every three to five years.

The Bottom Line

Having an estate plan in place can give you incredible peace of mind. It can be very helpful to know that if something happens to you, your family will know how you want everything distributed.

Also, if any of your wishes have changed or if you want to disinherit a member of your family or change the guardianship of someone under your care, having a plan is very important.

Take the time to do your research and talk to a qualified financial advisor or an estate planning attorney to ensure your estate plan documents comply with local laws.

This is a post from Clint Haynes, a Certified Financial Planner® and Financial Advisor in Kansas City, Missouri. He is also the founder and owner of NextGen Wealth. You can learn more about Clint at the website NextGen Wealth.