The beginning of a new year is a perfect time to review your estate plan—and if needed—update it to ensure it continues to align with your personal goals. Estate planning goals change over time for many reasons and if you’ve experienced a life-changing event recently, it’s imperative those changes are reflected in your estate plan.
Your estate plan should be updated when the following personal and financial changes occur:
1. A Change in Marital Status.
It’s best to update estate plans in the event of a marriage, divorce, or death of a spouse. It’s always interesting to me when I come across a client who still has an ex-spouse named as the beneficiary of his/her estate—even when the couple did not have an amicable parting. In those situations where the couple has children together, we routinely advise clients to leave those assets in a trust that preserves them for the children and protects the assets from the other spouse’s personal liability waste, or future relationships.
2. A Change in the Number of Beneficiaries.
This may occur due to a change in marital status, as mentioned above. Other reasons for a change in the number of beneficiaries include: a birth, death, an adoption of a child, removal or addition of other beneficiaries (say, a best friend), or a change to include extended family such as grandchildren, nephews or nieces.
3. A Change in the Status of a Beneficiary.
The condition of the beneficiaries can effect the validity of your estate plan. The beneficiaries’ age, health, mental capacity, addiction problem and creditor issues, are just some examples that need to be considered and, therefore, you might need to make some changes. For instance, you may have a child or other beneficiary with disabilities who can’t or shouldn’t receive a distribution directly and for whom you need to provide special care instructions. At the other end of the spectrum, requiring that your child’s inheritance be held in a trust to be managed by an elderly and infirm aunt may not make sense if your son just graduated with a PHD.
4. A Substantial Change in Your Net Worth or Assets.
Frighteningly, we come across some clients who have estate plans that haven’t been changed—not even amended—in 10 years. In many of these cases there has been a substantial increase in his/her net worth, and the assets listed at the creation of the estate plan have changed dramatically (generally increased). We advise not leaving anything to chance—or the courts!, for that matter—and keep (up to date) a list of controlled assets that are acquired and disposed of … and check the numbers you used to calculate who gets what and when still are reasonable.
5. A Change in Trustees or Fiduciaries.
Make sure the people you left in charge, as listed in your estate plan, are still fit choices to do so. These people have a large responsibility to carry out your legacy—the way you want it to be carried out.
If the people you named in your estate plan have died, aged and incapable, or are no longer part of your life for any reason, you need to update. Issues to consider include: age, mental and physical health, financial proficiency, and substance abuse concerns.
6. A Change in Address (Across State Lines)
Moving to another state is not devastating to your estate plan, but moving to another state with possibly different tax and probate laws just means that you should update some items in our estate plan. Generally, an estate plan created validly in one jurisdiction is valid in another state, but there may be clauses to be omitted or added to avoid additional expense and delay in the allocation of the estate.
Finally, you might want to consider one other estate planning change for 2015: upgrading your will to a more formal revocable living trust. The right trust is simple, cost effective, it can provide privacy by keeping the assets you left and to whom confidential (as opposed to probate, which is public record), provide asset protection for your heirs, and account for a number of contingencies as listed above. A revocable living trust can also provide for your own care, and typically includes general and healthcare powers of attorney, and living wills.
Most likely you have invested a great deal of thought, emotion and time in developing your estate plan. After all, we’re talking about your family here, and all your hard work, to make sure they’re taken care of when you’re no longer able to do so.
The updates may only be minor changes, such as switching your designations for trustees, executors and agents in your powers of attorney and health care proxies.
If you don’t have an estate plan, the beginning of a new year is a perfect time to create one. Leaving a legacy for your family should be at the top of your resolution list for 2015.
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Mesa, Arizona 85203