One of the most common mistakes in estate planning is thinking of the estate plan, as being completed and never needing to be reviewed. That is similar to taking your car for an oil change and then simply never returning for another oil change. The years go by, your life changes and you need an estate plan review.
Most people get their original wills and other documents from their estate planning attorney, put them into their safe deposit box or a fire-safe file drawer and forget about them. There are no laws governing when these documents should be reviewed, so whether or when to review the estate is completely up to the individual. That often leads to unintended consequences that can cause the wrong person to inherit, fracture the family and leave heirs with a large tax liability.
A better idea: review the estate plan on a regular basis. For some people with complicated lives and assets, that means once a year. For others, every three or four years works. Some reviews are triggered by changes in life, including:
- Marriage or divorce
- Large changes in the size of the estate
- A significant increase in debt
- The death of an executor, guardian or trustee
- Birth or adoption of children or grandchildren
- Change in career, good or bad
- Health crisis
- Changes in tax laws
- Changes in relationships to beneficiaries and heirs
- Moving to another state or purchasing property in another state
- Receiving a sizable inheritance
What should you be thinking about, as you review your estate plan? Here are some suggestions:
Have there been any changes to your relationships with family members?
Are any family members facing challenges or does anyone have special needs?
Are there children from a previous marriage and what do their lives look like?
Are the people you named for various roles—power of attorney, executor, guardian and trustees—still the people you want making decisions and acting on your behalf?
Does your estate plan include a durable power of attorney for healthcare, a valid living will, or if you want this, a DNR (Do Not Resuscitate) order?
Has your estate plan addressed the possible need for Medicaid?
Do you know who your beneficiary designations are for your accounts and are your beneficiary designations still correct? Your beneficiaries will receive assets outside of the will and nothing you put in the will can change the distribution of those assets.
Have you aligned your assets with your estate plan? Do certain accounts pass directly to a spouse or an heir? Have you funded any trusts?
Finally, have changes in the tax laws changed your estate plan? Your estate planning attorney should look at your state, as well as federal tax liability.
Just as you can’t plant a garden once and expect it to grow and bloom forever, your estate plan needs to be reviewed, so that it can protect your interests as your life and your family’s life changes over time.