Estate planning shouldn’t be thought of as a one-time proposition. Just like with financial planning, as your life circumstances changed, so to can your planning needs and wishes – sometimes significantly. Even if you have a properly prepared estate plan, it may need to be updated for a variety of reasons. Here are a few of the most common reasons:
1. Deaths – If individuals named (as beneficiaries or executors) have died or they become incapacitated, it may be necessary to change your estate plan and there may be a need to perform certain “administration” tasks.
2. Assets – Revisions may be needed if the value of assets has increased or decreased significantly, or they are no longer owned. For example, if you specifically leave your home to one of your children, and later sell it, you may want to change the distribution of your other assets.
3. Marriage – Getting married usually dictates the need to review your estate plan. Which assets should pass to your spouse? Are step-children involved? If this is not spelled out in your documents, the state may decide. In a community property state, a spouse automatically inherits half of all community property. In most other states, a spouse may receive one third to one half of the estate, absent any other directions.
4. Divorce – If you get divorced, it’s best to have a new estate plan drafted or at least modify your existing plan. For instance, you might have your former spouse removed as a primary beneficiary. In addition, you may want to change the beneficiary of your life insurance, pension or any existing IRAs. Consider the use of a trust if children from a previous marriage are involved. You may also want to change your estate plan if one of your children gets divorced or is in a bad marriage to avoid their inheritance coming under the control of their ex-spouse.
5. Births – Once you have children, your estate plans should be amended immediately to include the names of guardians to care for the children in the event you die prematurely. Also, parents or grandparents might wish to restructure their estate plans concerning distribution of assets after children are born.
6. Retirement – This event may also trigger the need to make changes to an existing estate plan. For example, many retirees sell their homes and move to other states. But state laws can vary widely. Updating documents to deal with things such as retirement account planning and long term care planning are critical.
7. Tax law revisions – The Internal Revenue Code is regularly changed, including late last year. In fact, many aspects of the recent tax law changes may change again in January 2013. A properly prepared estate plan is designed to take advantage of maximum tax benefits that exist today, but on occasion has to be updated as tax laws change.
8. Long Term Care – When you transition for complete independence to some level of dependence (e.g. – in-home care, assisted living, nursing home) your estate plan needs to provide adequate authority for your advocates to handle your financial and medical affairs. For instance, protecting your assets from being consumed by your care costs through programs such as Medicaid and the VA requires special planning that can only be accomplished if you have left someone the necessary authority to do so.
If any of these events has occurred in your life or if it has been more than three years since estate plan has been reviewed, we welcome you to call us to schedule a free, brief phone conference to discuss your current circumstances and whether there is a need to update your estate plan. Just a few moments of time can give you piece of mind.