When I work with new clients on the creation of an estate plan, I stress the importance of keeping their estate plan current and relevant. That requires both immediate and routine reviews. To make sure your plan works as intended, you should ask yourself this question – if it is time to update your estate plan?
Regularly Review Your Estate Plan
Regular reviews of your estate plan are essential to ensure it remains accurate and effective. Most estate planning attorneys recommend conducting routine reviews every three to five years until your children reach adulthood, or until you are around age 50 if you do not have children. After this milestone, it is advisable to review your estate plan every four to six years. During these routine reviews, you should pay particular attention to common changes that might necessitate revisions:
- Changes in Income: As you progress through your career, your income is likely to increase. Significant changes in your financial situation can impact your estate plan. For example, an increase in income might necessitate changes in how you allocate your assets or in the type of trusts you use to protect those assets.
- Changes in Assets: Over time, your asset structure is likely to change, especially as your income and family size grow. Acquiring new assets such as real property, investments, or valuable personal items means you need to update your estate plan to ensure these assets are adequately protected and distributed according to your wishes.
- Changes in Beneficiaries: Life events such as marriage, the birth of children, or even the death of a beneficiary can significantly impact your estate plan. You should regularly update your plan to reflect these changes, ensuring that your intended beneficiaries are correctly identified and that your assets are distributed as you wish.
- Changing Fiduciaries: The individuals you have chosen to serve as Personal Representatives, Trustees, or other fiduciaries in your estate plan may need to be changed over time. Someone who was willing and able to serve in such a capacity when you first created your plan may no longer be able to do so. Each time you review your estate plan, consider whether your chosen fiduciaries are still the best candidates for these roles.
Update Your Estate Plan Promptly When Necessary
In addition to routine reviews, certain life events call for immediate update to your estate plan. These events can dramatically change your personal and financial circumstances, making it essential to update your plan to reflect your current situation:
- Marriage: When you marry, you will likely need to update the beneficiary designations on your Will, retirement accounts, and life insurance policies. You may also need to change fiduciary positions within your plan, appointing your new spouse to a significant role or adjusting the responsibilities of other fiduciaries. Additionally, if one of your children marries, you might want to review your plan to consider the potential influence of a new son- or daughter-in-law.
- Divorce: It is crucial to update your estate plan immediately following a separation or divorce to remove your ex-spouse as a beneficiary and to make any other necessary changes. Failing to do so could result in your ex-spouse inheriting your assets or retaining control over aspects of your estate plan that could be against your wishes.
- Birth and Death of Beneficiaries or Fiduciaries: The birth of a child or grandchild should be noted in your estate plan to ensure they are included as beneficiaries. Conversely, the death of anyone who is part of your estate plan, whether as a beneficiary or a fiduciary, necessitates a review and update of your plan to reflect this change.
- Children Reaching Adulthood: Once your youngest child reaches adulthood, you may want to update your estate plan to reflect this new phase in their life. Age 25-30 can be a good benchmark.
- Relocation to a New State: State laws govern many aspects of your estate plan. If you move to a new state, you should consult with an estate planning attorney in that state to determine if any changes to your plan are advisable. Different states have different laws regarding wills, trusts, and other estate planning tools, so it is crucial to ensure your plan complies with the laws of your new state of residence.
- Significant Change in Assets: While minor changes in your asset portfolio can be accounted for in your plan, significant changes such as buying or selling a business or other valuable assets may require a thorough review and revision of your estate plan. Ensuring that all substantial assets are included and protected in your plan is essential for maintaining its effectiveness.
- Retirement: Retirement brings about many changes in your financial situation. As you transition from earning income to withdrawing funds from retirement accounts and possibly selling major assets, it is a good time to review your estate plan. You should also consider adding a Medicaid planning component to your estate plan if you have not already done so. This can help protect your assets from being depleted by long-term care costs.
Do You Need Help Updating Your Estate Plan?
For more information, please contact our estate planning office in Owings Mills, Maryland by calling 410-654-3850 to schedule an appointment.
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