Having a child or adopting one is one of the most common reasons for updating your will.
If you have already made an estate plan, you have taken a step most people tend to ignore. According to CNBC, a whopping 62% of Americans don’t have a will. However, an estate plan needs to be updated regularly because your life continues to evolve. While there is no fixed interval for updating your estate plan, it merits a revisit when you experience one of the following life-changing events:
Addition to the Family
Having a child or adopting one is one of the most common reasons for updating your will. If your children are minors, you need to appoint a personal guardian to take care of them in case of your death. However, you must use a will because a living trust does not allow you to do so. It is also prudent to appoint someone other than the personal guardian to manage their finances and property.
You should update your will or living trust to include your spouse if you get married. While different states have different inheritance rules, you can override them by specifying in your will what you want your spouse to get on your death. If you have named beneficiaries of your bank accounts, retirement accounts, life insurance policies, etc., you may want to update them in favor of your spouse. Do pay special attention to any powers of attorney you may have executed before your marriage in your annual updates for estate plans. If you remarry, you must factor in your divorce decree in your estate plan.
Getting a Divorce
Although most states automatically revoke wills in favor of spouses when people get divorced, some states go by what your will says. To avoid a messy situation after your death, you should update your will to reflect your new marital status. You may also desire to revoke any power of attorney in favor of your spouse and revise the beneficiary designations of bank accounts, insurance policies, and retirement accounts.
Death of Your Spouse
It is customary for married people to leave their property to each other. You should make a new will or living trust if your spouse expires. You should also update the beneficiary designations and create new powers of attorney, as needed. You may decide to roll over your spouse’s retirement account into your own retirement account or leave it as it is. Ask your accountant for advice as both options have their pros and cons.
Acquisition of Valuable Assets
If you bought property or acquired substantial assets, it may be appropriate to update your estate plan. Remember, while making a will is the simplest method, you can only avoid probate with a revocable living trust. Similarly, if you have run up large debts, you should consult an estate planning lawyer. You can minimize the impact of the debt on your beneficiaries.
As is evident, there are quite a few reasons why you should revisit your estate plan from time to time. You will be able to accommodate changes in your personal and financial status and prevent your heirs and beneficiaries from engaging in bitter and expensive disputes regarding the distribution of your estate.