Reviewing and revising your estate plan ensures that it captures your last wishes.
To ensure that your assets and wealth reach the right hands after you pass away, it is imperative to plan and document your wishes well before you reach a stage when you lose your abilities to create an estate plan or will. Estate planning helps to distribute your assets so that they provide for people and the causes that are so dear to you. Not having a will or doing no estate planning is a gross mistake because it can leave your family members fighting over your assets – that keep losing value. However, making an estate plan or creating a will is not enough if you don’t update it because, with time, circumstances keep changing, and your wishes may change, too. You must amend or update the will to capture your revised wishes.
Review and revision of your estate plan is almost mandatory on a regular basis. Only the timing of revisions to the plan can vary. Three years is the average time after which you should review your estate plan. Wills and estates lawyers suggest that any changes to laws governing your estate and tax laws should trigger a revision in your estate plan. Changes in laws might necessitate changes to advance medical directives and power of attorney.
When specific events occur in your life, it is time to review your estate plan. The changes in circumstances that arise from the events make it necessary to modify your estate plan. We’ll examine some of those events in this article.
Moving to a new state
There are no federal laws on estate planning. The laws of your state govern estate planning in that state. The laws of each state are different, and the nuances vary. It can be as trivial as the number of witnesses required to execute a valid will to and can be of more serious types like making it mandatory to allocate a fixed share of the estate to the spouse, although the proportion may vary from one state to another. Again, although most states do not have an inheritance tax or estate tax, there are a few states where it still exists.
The laws differ between states on some elements of the estate plan such as advance medical directives, and living wills, powers of attorney, and more. To ensure that the documents remain effective in the new state where you moved, you must revise them to align with the laws of the new state. Moreover, acquiring a secondary residence in another state is a reason for updating your estate plan.
There is a change in your objects of affection
When there is an addition to the family, there are chances that your objects of affection might change. The arrival of a child or grandchild is such an event when there is a reason to update the estate plan to include the name(s) of the new family member(s). It can also happen when there is a new in-law added to the family. It is a tactical move to avoid chances of lawsuits and conflicts in the future.
Deleting someone previously included in the will may sometimes become necessary. For example, is there a case of estrangement of some family members? On finding some inheritor behaving irresponsibly with the money, you can revise the plan and make an appropriate change by deleting them.
Instances of re-marriage, divorce, and loss of a spouse by way of death are reasons for updating estate plans to include or delete names. Again, if there is a change of heart and you turn more charitable and wish to allocate some more funds to them, then surely you must update your estate plan.
Change in assets or liabilities
The value of your estate can change from the time of the creation of your estate plan. It is quite normal and a reason for reviewing and revising your estate plan, depending on whether there has been an increase or decrease in value. You must review the manner of distribution and consider whether you would still stick to it or make changes to suit the new circumstances. A review is also necessary if there is any change in the composition of your estate. You might have liquidated a business that you owned at the time of creating the will or have sold some real estate after creating the will. In such cases, you must review the plan to accommodate any change that suits the circumstances and retains the relevance of the plan.
Outdated retirement plan
Beneficiary designations of 401(k) and IRAs and other retirement plans change with time, and it is necessary to update it, but many people often overlook this vital exercise. The beneficiaries mentioned in the designation form filed with the retirement plan remains valid and overrules the beneficiaries mentioned in your estate plan or will. Often people do not review these forms for decades, but updating them is very important, especially if there has been a considerable increase in the value of the fund. Designations of beneficiaries also determine who receives annuities, some financial accounts, life insurance, and some other assets.
Inappropriate trustees or personal representatives
To implement your estate plan or will you must name some trustees or personal representatives (formerly called executors) who are responsible for successfully implementing it. Often these appointments do not receive the attention they deserve from the people who create the plan, and even if done carefully, circumstances might have changed that necessitates review. You must carefully consider the appointments that you have done to understand if they are still willing and capable of shouldering the responsibility. Do you feel that someone else would be a better choice?
Reviewing and revising your estate plan ensures that it captures your last wishes and remains relevant to the laws, which is essential for its smooth execution.