Reasons To Update Your Estate Plan
Estate plans must be updated regularly for various reasons. Plans reflect life and financial situations at a current time and offer protection in the event you should become incapacitated. However, over the years circumstances may change and estate plans may need revisions. It is in your best interest to get in the routine of updating your estate plan every three to five years if not more often. Failure to do so may eventually cause issues in probate court.
Examples Of When To Update Your Plan
Various situations require a modification of an existing estate plan. These situations may include: change in tax laws, marriage, divorce, and/or death, change in financial status, birth, adoption, moving, and general life changes. Changes such as these may render your initial plan as obsolete. Thus, reviewing estate plans prevents future problems for you and your family.
Changes in Tax Laws – The law of the land dictates a will’s legality. Estate plans must follow state law, or there may be issues executing your will after your death, or difficulties following your wishes if you become incapacitated. Families do not need additional stress during difficult times. So, engaging in estate planning updates helps to bring your current will under the prevailing law.
Divorce, Marriage, or Death – Estate plans set up during a marriage need to be reviewed after a divorce or death of a spouse. For example, if your last estate plan left property, retirement funds, etc. to an ex-partner, this may need to be changed. Similarly, if you get married it’s important to update the estate plan to include your spouse. Also, after a death in the family distribution amounts must be recalculated and beneficiaries reassigned. As a result, plans should be updated as soon as possible after a life altering event.
Changes in Financial Status – As time passes most folks acquire more assets.Some people develop, or sell a successful business, inherit money and/or property, and a lucky few win the lottery! Additionally, others must file bankruptcy, lose fortunes, retire, and/or have expensive medical emergencies. All positive and negative financial events affect an estate plan. Thus, it’s important to keep a current plan in place.
Birth and Adoption – The birth and/or adoption of a child or grandchild is a happy event. Of course, this joyous occasion affects the status of a will/trust. The estate plan may want to include this new member of the family. For example, gifting trusts, education plans, and beneficiaries need to be considered at this time.
Moving – When your family moves to another state your estate plan needs to be evaluated by an attorney in that state. Each state has different tax laws and a qualified lawyer can make sure your plan meets the rules in that state.
Life changes – Sometimes life changes require a modification to an existing estate plan. For example, children and/or grandchildren grow up and may now be named as trustees or no longer require guardians. Sometimes the trustee you picked may have fallen ill or developed a drug habit. Sadly, a new trustee needs to be named. Also, someone may need to look after that person’s inheritance so they don’t use the money on drugs. Another example involves a tragic event, like an automobile accident, that leaves a family member disabled. The estate plan may want a special provision to assist this person. In other words, as time passes, people change and your estate plan needs to reflect those changes.
There are several reasons to update wills and trusts, estate plans, beneficiary information, and so forth. No one likes to think about it, but your passing can happen without notice. When you pass away, it is important that your estate ends up in the hands of the proper beneficiaries. Thus, it’s vital to keep legal documents up to date.
Various legal documents should be available to your attorney and/or executor. These documents become important to your heirs after you pass away or if you become incapacitated. Vital documents include: wills, trusts, real estate deeds, financial institution information(bank accounts),insurance policies, debt information(credit cards, mortgages, loans, etc.), information on bonds, CD’s, retirement accounts, utilities, taxes, and any funeral/burial arrangements. Your attorney may add to this list. In short, it helps your family when all this is organized ahead of time.
Planning ahead simplifies an emotional time for your family. That’s why it is important to have a plan in place that is regularly reviewed and updated by an attorney specializing in family law and estate planning. Having an attorney that is up to date on the current laws regarding inheritance, real estate, transfers of ownership, and the working of the courts in all things related to probate remains vital. A qualified attorney will make sure all documentation is valid and that any changes adhere to local, state and federal laws.
Estate Plan Errors
One major mistake made when drawing up an estate plan is not appointing a guardian for your children. You must appoint a clear cut guardian for your children, in writing, to avoid problems at a later date. Children under eighteen years of age need to be cared for by a guardian if you and your spouse pass away. When you take the time to talk with individuals in your life about this responsibility and make it official by stating your desired wishes in your estate plan it will be easier to ensure the children will be properly cared for until they are eighteen. Otherwise, like everything else, guardianship of your children will be determined in Probate Court.
Another common issue that is overlooked is inheritance tax. This type of tax is a state tax that is paid on money inherited from a deceased person. There are ways to minimize tax liability to the recipient. If there is a large amount of liability, you may want to divide this tax liability among different individuals. Doing so makes it easier to account for tax liability and do your best to minimize it. Setting up a trust may remove some tax liability. However, these issues need to be discussed with a knowledgeable attorney.
Proper estate planning should be done in conjunction with a lawyer specializing in probate law and estate planning to avoid future issues. A well written plan protects heirs, transfers assets with minimal taxation, and protects family members. So, everyone should have a solid estate plan and go over it every three to five years with their attorney (sooner in an emergency).