Spring Cleaning for Your Estate Plan: Review and Revise

Takeaways

• Regularly reviewing and updating your estate plan is crucial to ensure that your money and property will be managed and distributed according to your wishes and that your health care preferences are followed.
• Changes in life events, financial status, health, and relationships may necessitate adjustments to your estate plan.
• An experienced attorney can provide guidance on updating your plan to meet your current circumstances and legal requirements.

Estate planning is a valuable aspect of financial and personal planning that ensures your assets are managed and distributed according to your wishes and that your health care preferences are followed. However, creating an estate plan is not a one-time task. As your life changes, so should your estate plan. Failing to update your estate plan can lead to unintended consequences, legal complications, and financial difficulties for your loved ones.

Spring is seen as a time for cleaning and renewal. It can also be the perfect time to review your estate plan and see if it needs revising. There are many reasons to revise an estate plan, including changes in marriage status, the birth or death of family members, and changes in financial status. Read on to learn about why you should dust off your estate plan and make sure it still expresses your wishes.

Changes in Family Structure

Life events, such as marriages, divorces, births, and deaths, affect your estate plan. After such events, you should review not only your estate planning documents but also any assets you have that are designated to go to a beneficiary, such as retirement accounts, real estate, or financial investments.

• Marriage. Getting married means incorporating your spouse into your estate plan. You may need to update your will, trusts, beneficiary designations, and powers of attorney to ensure your spouse has legal rights over your assets and medical decisions.
• Divorce. Divorce often requires removing an ex-spouse from your estate planning documents to prevent them from inheriting assets or making financial and health care decisions on your behalf. Some states automatically revoke an ex-spouse’s privileges, but updating your documents ensures clarity and avoids confusion.
• Birth or Adoption of a Child or Grandchild. The arrival of a child or grandchild in the family may necessitate updating your estate plan to include them as beneficiaries and possibly setting up trusts or plans, such as a 529 plan, to provide for their future financial needs.
• Adoption or Death of a Pet. Pets are valued companions for many. By including your pet in your estate plan, you can ensure that your furry friend continues to have a healthy and fulfilling life if you are no longer able to care for it. Periodically review the arrangements you have made for your pet, so you can ensure their continued well-being.
• Child Reaching Adulthood. When a child becomes a legal adult, you will no longer automatically be able to make decisions concerning their health. By having your young adult child complete an advance health care directive naming you and their other parent as health care agents, you can make medical decisions on their behalf if they become unable to make such decisions. This can provide extra peace of mind when they go off to college.
• Death of a Person in Your Estate Plan. If a trustee, executor, or a named beneficiary has passed away, you will need to designate new individuals to avoid legal complications.

Changes in Financial Status

Major changes in your financial situation, such as an increase or decrease in wealth, can affect your estate plan.

• Increase in Wealth. Acquiring significant assets through inheritance, business growth, or investments requires updating your estate plan to account for tax-efficient wealth distribution and asset protection.
• Decline in Financial Status. If you experience a financial downturn, you may need to adjust your estate plan to ensure that your liabilities are managed and your assets will be distributed appropriately.
• Selling or Acquiring Assets. Buying or selling a home, business, or other major asset necessitates an update to ensure they are properly included in, or removed from, your estate plan.

Relocation to Another State

State laws governing wills, trusts, probate, and estate taxes vary. If you move to a new state, you should have an experienced attorney review your estate plan to ensure compliance with your new state’s laws. Powers of attorney and advance health care directives may also need updating to align with state-specific requirements.

Changes in Tax Laws

Federal and state tax laws are subject to change, which can affect your estate planning strategies. Adjusting your estate plan in response to new tax laws, with assistance from an attorney, can help minimize estate taxes, maximize exemptions, and ensure a smooth transfer of assets to your heirs.

Changes in Health or Incapacity Planning

If your health declines or you are diagnosed with a chronic illness or disability, updating your estate plan becomes critical.

• Power of Attorney. Making sure you have a trusted individual to manage your financial decisions is essential to protecting your assets for use later in life and passing them on to your heirs.
• Advance Health Care Directive. Make sure this document continues to accurately reflect your health care preferences. This will ensure that your medical treatment aligns with your wishes if you become incapacitated.
• Long-Term Care Planning. If you anticipate needing long-term care, your estate plan should address how you will cover the costs, whether through Medicaid planning, insurance, or a trust.

Changes in Relationships with Executors, Trustees, or Guardians

Your designated executor, trustee, or guardian may no longer be the best choice due to changes in relationships, their ability to serve, or personal circumstances. Regularly reviewing these appointments ensures the right individuals are in place to manage your affairs or effectively care for your loved ones.

Establishing or Revising Trusts

Trusts can serve various purposes, including asset protection, tax efficiency, and providing for minors or a family member with special needs. Over time, you may need to modify existing trusts or establish new trusts to reflect your changing financial and family circumstances.

Business Ownership and Succession Planning

If you own a business, updating your estate plan is essential to ensure a smooth transition in case of retirement, disability, or death. A comprehensive succession plan prevents legal disputes and secures the financial future of your business and heirs.

Charitable Giving and Philanthropic Goals

If you wish to include charitable donations in your plans, setting up charitable trusts or foundations may be necessary. Periodic reviews ensure your philanthropic goals align with your current financial status and legacy wishes.

Regular Reviews and Revisions

Even if no major life changes occur, you should review your estate plan every three to five years to ensure it remains aligned with your wishes, family dynamics, financial status, and any new legal requirements.

Learn More About Estate Planning

Updating your estate plan is a crucial step in protecting your assets and ensuring that your wishes are honored. Life changes, financial shifts, and evolving laws make it necessary to review and modify your estate planning documents periodically. By staying proactive, you can provide your loved ones with clarity, minimize legal complications, and secure your legacy for future generations. An experienced estate planning attorney near you can help create a comprehensive plan that fits your unique needs or revise the plan you currently have.

For additional reading, check out the following articles:

• What Is a Last Will and Testament, and Why Do I Need One?
• Why Should I Work With an Estate Planning Attorney?
• How Life Insurance Is Involved in Estate Planning
• Choosing Retirement Plan Beneficiaries Requires Some Thought