When was the last time you looked at your estate plan? Having outdated legal documents, such as a Last Will and Testament or Durable Power of Attorney, can wreak havoc on your health and your family’s wealth. These documents ensure that your wishes are honored when you are no longer able to act for yourself. Circumstances change over the course of a lifetime, and your legal documents need to keep pace. Below are some circumstances that might cause an individual to update his or her estate planning documents:
Marriage: Whether it is your first or a later marriage, you will need to update your estate plan after you get married. A spouse does not automatically become your 100% heir once you get married. Depending on your state, your spouse may get one-third to one-half of your estate, and the rest will go to other relatives. Your estate plan will get more complicated if your marriage is not your first. You and your new spouse need to figure out where each of you want your assets to go when you die. If you have children from a previous marriage, this can be a difficult decision. There are a number of different options to ensure your children are provided for, including creating a trust for your children, making your children beneficiaries of life insurance policies, or giving your children joint ownership of property.
Children: Once you have children, it is important to name a guardian for them. If you do not name someone to act as guardian, the court will choose the guardian. Because the court does not know your children like you do, the person they choose may not be ideal. In addition to naming a guardian, parents can also set up a trust for the children so that assets are set aside for your children when they get older. Similarly, once your children reach adulthood, you will want to update your plan to reflect the changes. They will no longer need a guardian, and they may not need a trust. You may even want your children to act as executors or hold a power of attorney.
Divorce/Death or Incapacity of a Spouse: If you get divorced or your spouse passes away or becomes incapacitated, you will need to revisit your entire estate plan. It is likely that your spouse is named in some capacity in your estate plan.
Increase or Decrease in Assets: One part of estate planning is estate tax planning. When your estate is small, you do not usually have to worry about estate taxes because only estates over a certain amount, depending on current state and federal law, are subject to estate taxes. As your estate grows, you may want to create a plan that minimizes your estate taxes. If you have a plan that focuses on tax planning, but you experience a decrease in assets, you may want to change your plan to focus on other things.
Some miscellaneous reasons to update your estate plan also include:
- You move to another state
- Federal or state estate taxes have changed
- A guardian, executor, or trustee is no longer able to serve
- You wish to change your beneficiaries
- It has been approximately 3-5 years since the plan has been received by you or an attorney