The When, Why, and How of Estate Planning Checkups
Keeping your estate plan up-to-date is an important consideration and responsibility. While lots of people make an effort to create an estate plan, failing to make updates is all-too-common. There’s only so much you can do to ensure the longevity and relevance of your original plan at the time of its creation. Regardless of how meticulous or diligent you were, situations change with the times and few plans stay relevant as the years progress.
There are many situations where reviewing and updating your estate plan makes good sense. While the time to revise may vary widely according to individual circumstances, you should always review your estate plan every few years. Along with reviewing the details of the plan yourself, a professional estate planning lawyer can help to put things into perspective and create a plan that is flexible, robust, and designed to last.
Regardless of how meticulous or diligent you were, situations change with the times and few plans stay relevant as the years progress.
Here’s everything you need to know.
Estate planning lawyers try their very best to create precise documentation in order to account for future events. However, a compromise or trade-off is often needed between robust and flexible documentation. This is especially true for large and complex estates that involve multiple parties and significant assets. Regardless of experience or expertise, there is only so much that can be done to extend the life of an estate plan. Time itself is a significant factor that needs to be considered.
The older the documents are when they are executed or used, the greater the risk of a successful challenge to them. While creating a robust estate plan is not all about risk management, it should always be an important objective. As the chief measure of change, time involves constant flux and uncertainty. Your personal situation can change, the people around you can vary in significance, and the laws and regulations that define your estate can change considerably between governments and jurisdictions.
How often you need to update your estate plan depends on many variables. While most well-drafted estate plans do not need to be updated every three years, they certainly should be reviewed within that period. If and when your circumstances change, it’s important to carry out a review and conduct a detailed editing process. If you have a proven track record of reviewing, confirming, and possibly amending your estate planning documents, you have a greatly reduced risk of interference.
Attorney Leighton Burrey has a deep background in the often-intertwined fields of estate planning, tax law, business law, and litigation. He founded Business Estate & Tax Attorneys, P.C., as a full-service law firm for businesses and families that need sophisticated legal guidance in planning for the future and navigating complex challenges. The law firm provides tailored legal strategies that take into account all aspects of a business owner’s or family’s financial interests.
Let’s look at some common factors that are likely to change over time and may affect your estate plan.
Along with conducting reviews based on time itself, you should also review your plan if there’s a change in taxation laws or other relevant laws that govern your estate. Relevant laws may include changes to powers of attorney or advance medical directives, among others. While legal compliance is fundamental to every estate plan, changes to relevant laws are often omitted or misunderstood when documentation is reviewed. Along with laws, there may be changes regarding the defined roles and responsibilities of yourself and your estate planning lawyer.
Moving house can involve significant changes, with the details of your estate plan often needing to be adjusted along with your everyday life. Whether you have moved to a new country or a new state, it’s important to make changes based on the laws of your new jurisdiction. Estate planning laws aren’t national. Each state has its own laws, from trivial differences regarding witnesses through to significant differences surrounding marriage and inheritance.
If you’re living in or moving to California, it’s important to speak with a local lawyer with experience in Californian law. You should work with your estate planner to establish proof whenever you have changed residence. This is particularly important if you have a substantial estate based on real estate assets, or you have moved from a state with differing inheritance or estate taxes.
Ownership of new property or assets is significant for your estate planning purposes. Along with the value of new assets, it’s also important to consider how they were acquired and titled. Whether your assets grow or diminish over time, you will need to review how your property is divided and decide if your old estate plan is still relevant. Liabilities are just as important, with few real estate or business assets owned outright during the early days. Overall, a significant change in the composition of your estate always merits a review.
Qualified retirement plans are an important part of the estate planning process, but they’re often forgotten about or incomplete. The beneficiary of these accounts is determined by the plan itself, not by your will or trust. Updating beneficiary designations is crucial, especially if you haven’t done it for a while or the value of your account has grown substantially over time. In addition, beneficiary designations also control who receives life insurance, annuities, and some financial accounts.
In addition to the events listed above, an estate plan should always be reviewed when specific events take place in your life. Certain defined events, including births, deaths, and marriages, can change your personal circumstances and create a desire to alter the details of your estate plan. Despite their importance, personal changes are often overlooked when it comes to estate planning, either due to ignorance, misunderstanding, or forgetfulness.
While most well-drafted estate plans are designed to deal with specific defined events, such as the death of a child or spouse, they may not be flexible enough to accomplish your wishes when other life events take place. It’s impossible for an estate plan to deal with all eventualities, and once again, there is often a trade-off between what is robust and what is flexible regarding documentation.
The following life events should be caused to review and potentially update your estate plan:
- Children growing up – If your kids have grown up and left the nest, you may want to make them responsible for their own health, trust, and will affairs.
- Marriage or divorce – As soon as a marriage or divorce is finalized, it’s important to update your estate plan. This is also the case if your children or other beneficiaries have become married or divorced.
- Births or deaths – The birth of a new child or grandchild requires amending your estate plan, as does the sad case of a family member passing.
- Affections changing – The personal objects of your affection can and do change over time. If you experience significant changes in your relationships, you may want to change the details of your estate.
You should consider making changes to your estate plan whenever you need to change the name of beneficiaries, successors, agents, or trustees. By creating alternate options inside the plan, you have a contingency in place if a death takes place. It’s especially important to consider what could happen if the death of a beneficiary proceeded your own, including alternate financial arrangements and beneficiaries. If executors or trustees become inappropriate due to mismanagement or legal problems, it’s important to find new people who can implement your plan according to your wishes.
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How do you actually plan an estate?
Although every estate is unique, there are a few things you should always have.
The Estate Planning Review Process
Reviewing an estate plan involves a considered step-by-step process to identify and document any changes that have occurred. While simple estates and regular reviews are not particularly complex, large estates and lengthy-time periods between reviews can be challenging. Changes to significant assets, moving to a new jurisdiction, and complicated tax issues can also make this process more complicated. Along with checking the accuracy and relevance of trusts, deeds, family assets, and property agreements, certain questions should be asked regarding the following documents:
- Power of Attorney for Health Care – This document should be reviewed to see if it still reflects your values. Are changes needed regarding end-of-life and artificial life support directives? Do you need to remove or add the people selected to be in charge of your health care decisions?
- Durable Power of Attorney – Also called attorney-in-fact, this document selects the person who will be in charge of your finances. Do you want a spouse or child added or removed? Perhaps you want to select different agents to help manage your affairs?
- Last Will and Testament – Do you want to change the personal representatives or trustees selected to manage your assets upon death? Do you want to change any of the beneficiaries of the will? Are there any relevant revisions to make due to births, deaths, marriages, or changes of affection?
- Family Asset Management – Do you want to make changes to beneficiary designations due to life events? Should certain assets be placed in trust to avoid probate? Should a revocable or irrevocable trust be created? Are you happy with the current relationship set up between assets and beneficiaries?
Creating an estate plan is an essential part of maintaining and ensuring your legacy. Along with crafting a robust and flexible plan according to your wishes, it’s important to review and update this plan on a regular basis. Life is nothing but a series of changing events and evolving relationships, with a regular checkup needed to align the details of your estate with the people and legacy that define your life.
We believe that every client is unique.
We understand how tough these types of decisions can be and we will guide your estate planning with empathy, respect, patience and a commitment to ensuring your every wish is protected by law.
Disclaimer: The information in this article is for general purposes only, and it is not intended as a substitute for legal advice.