When to Update Your Estate Plan

With so many demands on our time, it can be hard to keep track of everything on our plates. Sometimes we put our planning for the future in a “set it and forget it” mode. While that can work great for 401k contributions, estate plans can become out of date and not represent your life situation or wishes as time goes on. It is a good idea to review your plan every 5 years and/or when certain key things shift in your life.

Getting Married, Getting Divorced, or Losing a Spouse

Our life partners play an understandably large role in our estate plan. It is very common for couples to leave much or all of their estate to their spouse in planning documents. Leaving assets to a spouse not only provides for their comfort when you pass, but can have some estate tax benefits, such as the unlimited marital deduction.[i]

Therefore, it is extremely important to review and update your estate plan when you get married. Conversely, if you get divorced, you most likely want to change a previous plan that significantly incorporated your former spouse.

Similarly, when you lose a spouse, it is important to review and update your plan to reflect a change in beneficiaries and any changes in your assets due to inheritance. And if estate taxes are a factor in your plan, it is very important to work with an attorney upon your spouse’s passing to ensure you do not lose your ability to claim any unused estate tax exemption amounts from your deceased spouse, as well as any other important tax planning.

Birth or Adoption of Children

Once you have children, your estate plan should be updated to make sure you have named guardians for your children if ever needed. Without this in place, decisions about your children’s future will be left up to a court process that may not result in your wishes being carried out.

Further, minor children do not have the legal capacity to inherit assets. Therefore, your plan should have a mechanism, like a testamentary trust in your will, through which your children will be able to inherit assets from you.

It is common for parents to set up an estate plan when their first child is born, but then not revisit the plan after subsequent children arrive. Because your family situation, assets, and guardian designations may change after such additional births, it is a good idea to update your plan when subsequent children are born or adopted.

In addition, when your children grow up and are no longer minors, you will likely want to update your plan to reflect your wishes and the different circumstances of having adult children who may have spouses and kids of their own.

Significant Change in Assets

If you have acquired a significant amount of assets, including property, larger life insurance policies, or a bigger retirement portfolio, since your plan was put in place, it is a good idea to review and potentially update your plan. You may wish to reevaluate the distribution of your assets, or you may need to incorporate some tax planning in your estate plan.

Further, as you acquire more assets and have a more complicated estate, it may make sense to incorporate a revocable living trust into your plan to provide ease of administration of your estate upon your passing or if you become incapacitated.

Move to a New State or Country

If you move to a new state or country, you should meet with a local estate planning attorney to make sure that your plan complies with the laws in your new home jurisdiction. You may need to redo your plan to ensure it is valid and can carry out your wishes.

If your plan could use an update, reach out to me for a free consultation. Together, we can make sure your plan reflects your current life situation in a way that takes care of your loved ones and carries out your wishes!

[i] The unlimited marital deduction allows spouses to give each other unlimited gifts during life and upon death free of estate and gift tax.