Estate planning is a strategy for developing an approach to the care and management of your estate if you become incapacitated or upon your death. One commonly known purpose of estate planning is to minimize taxes and costs, including taxes imposed on gifts, estates, generation skipping transfer and probate court costs. However, your plan must also name a person you can trust to make medical and financial decisions for you if you cannot make decisions for yourself. You also need to consider how to leave your property and assets given your family’s circumstances and needs and be able to identify which life events require an immediate update to your estate plan.
Since your family’s needs and circumstances are constantly changing, your estate plan must also evolve. Your plan needs to be updated when certain life changes occur to make sure your wishes are realized, which would include, but are not limited to: marriage, the birth or adoption of a new family member, divorce, the death of a loved one, a significant change in assets, and a move to a new state or country.
Marriage: it is not uncommon for estate planning to be the last item on the list when a couple is about to be married - whether for the first time or not. On the contrary, marriage is an essential time to update an estate plan. You probably have already thought about updating emergency contacts and adding your spouse to existing health and insurance policies. There is another important reason to update an estate plan upon marriage. In the event of death, your money and assets may not automatically go to your spouse, especially if you have children from a prior marriage, a prenuptial agreement, or if your assets are jointly owned with someone else (like a sibling, parent, or other family member). A comprehensive estate review can ensure you and your new spouse have adequately addressed the situation.
Birth or adoption of children or grandchildren: when a new baby arrives it seems like everything changes - and so should your estate plan. For example, your trust may not “automatically” include your new child, depending on how it is written. So, it is always a good idea to complete a review and add the new child as a beneficiary. As the children (or grandchildren) grow in age, your estate plan should adjust to ensure assets are distributed in a way that you deem proper. What seems like a good idea when your son or granddaughter is a four-year-old may no longer look like a good idea once their personality has developed and you know them as a 25-year-old college graduate.
Divorce: some state and federal laws may remove a former spouse from an inheritance after the couple splits, however, this is not always the case, and it certainly should not be relied on as the foundation of your plan. After a divorce, you should immediately update beneficiary designations for all insurance policies and retirement accounts, any powers of attorney, and any existing health care proxy and HIPAA authorizations. It is also a good time to revamp your will and trust to make sure it does what you want (like leaving out your former spouse).
The death of a loved one: sometimes those who are named in your estate plan pass away. If an appointed guardian of your children dies, it is imperative to designate a new person. Likewise, if your chosen executor, health care proxy or designated power of attorney dies, new ones should be named right away.
Significant change in assets: whether it is a sudden salary increase, inheritance, or the purchase of a large asset, these scenarios should prompt a review of your estate plan to determine if an adjustment is necessary. The bigger the estate, the more likely there will be issues over the disposition of the assets after you are gone. For this reason, it is best to see what changes, if any, are needed after a significant increase (or decrease) in your assets.
A move to a new state or country: for most individuals, it is a good idea to obtain a new set of estate planning documents that clearly meet the new state’s legal requirements. Estate planning for Americans living abroad or those who have assets located in numerous countries is even more complicated and requires professional assistance. It is always a good idea to learn what you need to do to completely protect yourself and your family when you move to a new state or country.
We are here to help you understand and navigate which life events require an immediate update to your estate plan to properly protect you and your family and ensure your wishes are honored. Please feel free to learn more about an estate plan by visiting our website and set up a free consultation.