This year, Estate Planning Awareness Week ran from October 17th to 23rd, and one of our primary goals is to educate you on the vital importance of not only preparing an estate plan, but also keeping your plan up-to-date. While you almost surely understand the importance of creating an estate plan, you may not know that keeping your plan current is every bit as important as creating a plan to begin with.
In fact, outside of not creating any estate plan at all, outdated estate plans are one of the most common estate planning mistakes we encounter. We’ll get called by the loved ones of someone who has become incapacitated or died with a plan that no longer works because it was not properly updated. Unfortunately, once something happens, it’s too late to adjust your plan, and the loved ones you leave behind will be stuck with the mess you’ve left, or they could end up in a costly and traumatic court process that can drag out for months or even years.
Estate planning is an ongoing process, not a one-and-done type of deal. To ensure your plan works properly, it should continuously evolve along with your life circumstances and other changing conditions. Regardless of who you are, your life will inevitably change: families change, assets change, laws change, and goals change.
In the absence of any major life events, we recommend reviewing your estate plan annually. However, there are several common life events that require you to immediately update your plan—that is, if you want it to actually work and keep your family out of court and out of conflict.
LIFE EVENTS THAT NECESSITATE AN IMMEDIATE REVIEW OF YOUR ESTATE PLAN
01 | YOU GET MARRIED:
Marriage not only changes your relationship status; it changes your legal status. Regardless of whether it’s your first marriage or fourth, you must take the proper steps to ensure your estate plan properly reflects your current wishes and needs.
After tying the knot, some of your most pressing concerns include naming your new spouse as a beneficiary on your insurance policies and retirement accounts, granting him or her Medical Power Of Attorney and/or Durable Financial Power Of Attorney (if that’s your wish), and adding him or her to your will and/or trust
02 | YOU GET DIVORCED:
Because divorce is such a stressful process, estate planning often gets overshadowed by the other dramatic changes happening. But failing to update your plan for divorce can have terrible consequences.
Once divorce proceedings start, you’ll need to ensure your future ex is no longer eligible to receive any of your assets or make financial and medical decisions on your behalf—unless that’s your wish. Once the divorce is finalized and your property is divided, you’ll need to adjust your estate plan to match your new asset profile and living situation.
03 | YOU GIVE BIRTH OR ADOPT:
Welcoming a new addition to your family can be a joyous occasion, but it also demands entirely new levels of planning and responsibility. At the top of your to-do list should be legally naming both long and short-term guardians for your child.
Once you’ve named guardians, consider putting other estate planning vehicles, such as a Revocable Living Trust, in place for your kids. These planning tools can make certain the assets you want your child to inherit will be passed on in the most effective and beneficial way possible for everyone involved.
04 | YOU HAVE A MINOR CHILD REACH THE AGE OF MAJORITY:
Once your kids become legal adults—which is age 18 or 21, depending on your state—many areas of their life that were once under your control will become entirely their responsibility. And if your kids don’t have the proper legal documents in place, you could face a costly and traumatic ordeal should something happen to them.
For instance, if your child were to get into a serious car accident and require hospitalization, you would no longer have the automatic authority to make decisions about his or her medical treatment or the ability to manage their financial affairs. Without legal documentation, you wouldn’t even be able to access your child’s medical records or bank accounts without a court order.
To prevent your family from going through an expensive and unnecessary court process, speak with your kids about the importance of estate planning, and meet with us to ensure they have the proper legal documents in place as they start their journey into adulthood.
05 | A LOVED ONE DIES:
The death of a family member, partner, or close friend can have serious consequences for both your life and estate plan. If the deceased person was included in your plan, you need to update it accordingly to fill any gaps his or her death may create. From naming new beneficiaries, executors, and guardians to identifying new heirs to receive assets allocated to the deceased, make sure your plan addresses all voids created by a death in the family as soon as possible.
06 | YOU GET SERIOUSLY ILL OR INJURED:
As with death, illness and injury are an unavoidable part of life. If you’ve been diagnosed with a serious illness or are involved in a life-changing accident, you may want to review the people you’ve chosen to handle your medical decisions as well as how those decisions should be made. The person you want to serve as your healthcare proxy can change with time, so be sure your plan reflects your current wishes.
07 | YOU MOVE TO A NEW STATE:
Estate planning laws can vary widely from state to state, so if you move to a different state, you’ll need to review and/or revise your plan to ensure it complies with your new home’s legal requirements. And because some estate planning laws are complex, you’ll want to meet with us to make certain your plan will still work exactly as you desire in your new location.
08 | YOUR ASSETS OR LIABILITIES CHANGE SIGNIFICANTLY:
Whenever the value of your estate changes dramatically—whether an increase or decrease, or even just the acquisition or sale of assets— you should revisit and update your plan. Whether you inherit a fortune, take out a new loan, retire, sell a home or business, buy a home or business, or change your investment portfolio, your plan should be adjusted accordingly.
09 | YOU BUY OR SELL A BUSINESS:
If you plan to sell a business, you can implement estate planning strategies to avoid almost all of your taxes—as long as you contact us ahead of time. And, of course, if you are buying a business, you’ll want to ensure your plan is updated to take into account your succession plans for the new venture.
For every business you own, you should consider creating a buy-sell agreement and a business succession plan to protect both your business and your family in case something happens to you. In your plan, you can not only decide who will take over your role as the company’s owner should something happen to you, but you can also provide him or her with a detailed road map for how the business should be run in your absence with a comprehensive business succession plan.
10 | THE FEDERAL ESTATE-TAX EXEMPTION OR YOUR STATE’S ESTATE-TAX EXEMPTION CHANGES SIGNIFICANTLY:
Anytime the federal estate-tax exemption or your state’s estate-tax exemption changes dramatically, we recommend you review your financial assets and your estate plan. Tax laws are constantly changing, so you should consult with us to ensure you are achieving the maximum tax savings possible and your investments are still aligned with your strategic goals in light of the latest changes to the tax code.
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