One widespread error in estate planning is not to have a will or other key elements of an estate plan. The other error is to fail to keep estate planning documents up-to-date.
Even if you have an estate plan, your work isn’t done. Your estate plan should be reviewed with your estate planning attorney every couple of years, says Forbes in the recent article, “7 Reasons It's Time To Update Your Estate Plan.”
If there’s a change in the laws that govern your estate, like powers of attorney or advance medical directives, you should review your plan. An estate plan should also be reviewed, when you experience a significant life event or changes in circumstances. Let’s look at the most likely events that should motivate you to contact your estate planning attorney.
- A move to another state. Every state has its own laws for wills, trusts, and other estate planning documents. Some of the differences are minor, like the number of witnesses required for a will to be valid; and others are more substantive, like laws that say a spouse will inherit a minimum share of the estate. A few states also still have inheritance or estate taxes.
- A second home in another state. This may also be cause for a plan update. You might want to work with your attorney to determine which state should be your principal residence. You may also need powers of attorney and advance medical directives that are valid in the new state, in case you become disabled there.
- A change in your feelings or circumstances with heirs. This can occur when there’s an addition to the family, like a new child or grandchild. Revise the documents so the new family members are named and specifically included. The same is true with a new in-law. You also may want to delete someone who was included in your estate plan because of a death, divorce, or remarriage. Perhaps you also want to disinherit someone who’s estranged from the family. Your thoughts about a specific charity may have changed or you may want to change the charities in your will.
- A change in your assets or liabilities. A significant change in the value of your estate since the plan was drafted, is reason for a review, whether it is an increase or decrease. You should look at the way in which the property is divided and decide if that’s still how you want it with your new circumstances.
- A change in the composition of your estate. If you’ve sold an asset, like a business or real estate that was a major part of the estate or you’ve added such an asset, you need to examine your plan.
- Your qualified retirement plan is outdated. It’s common for a person to not update the beneficiary designations of IRAs, 401(k)s, life insurance, and other retirement plans. Updating the beneficiary designations is critical, especially if the value of the account has increased significantly.
- You need to change executors or trustees. These individuals may become inappropriate. Circumstances change. A person may no longer be able and willing to perform these jobs as you’d like them done, or they may have moved away or died. You need to determine who’s now the best choice for these positions.
Reference: Forbes (December 2, 2018) “7 Reasons It's Time To Update Your Estate Plan”