Whilst estate planning is a complex and time-consuming process, it’s an essential step in securing your family’s financial future.
This is why people research how to create a trust or write a will. To prevent unintended consequences for yourself and your loved ones, this article explores the importance of regularly updating your estate plan.
What’s an Estate Plan?
This is a legal document outlining how an individual’s assets and properties will be managed, distributed, or transferred after they pass away. It typically includes a will designating beneficiaries, and an executor to oversee the distribution of assets. It may also include other documents such as trusts, powers of attorney, healthcare proxies, and living wills.
An estate plan can also include instructions for medical care in case of incapacitation or end-of-life decisions. By regularly involving the help of a professional advisor or attorney, you can ensure that it remains legally valid and effective in achieving your goals.
Marriage and Divorce
Getting married or divorced affects your assets, beneficiaries, and the individuals you’ve designated as your executor or trustee. Failing to make these updates could result in negative consequences for your estate plan.
Let’s suppose you were to pass away after getting remarried. If you fail to update your estate plan, your assets may go entirely to your new spouse. This would be unfortunate if you wanted them to be distributed partly to your children, or different people in varying percentages.
If you get divorced and don’t update your estate plan, your ex-spouse may still inherit part of your assets. Specialist lawyer websites discuss which estate planning documents you need to prepare, and how much the legal fees are. You can access live chats and FAQs online, and request free case evaluations.
The Birth or Adoption of Children
Many people overlook the importance of updating their plans when they have kids. Whether through birth or adoption, having new additions to the family means that your estate plan needs to be revised accordingly.
In turn, you can ensure that your children are provided for in case something unexpected happens. If you don’t update your estate plan regularly, your assets could be distributed according to outdated instructions.
Supposing you named someone as a beneficiary before having children and never updated the plan after their birth or adoption. In this scenario, the other person would receive everything – even if you wanted a portion of your assets to go towards supporting your kids.
Updating an estate plan after the birth or adoption of a child can protect them in case something happens to both parents. It allows for clear instructions on who’ll take care of the child, and how they’ll be financially supported.
Death or Relocation to Another State or Country
As time passes, circumstances change, and relationships evolve. Your beneficiaries may have gotten married or divorced, and children may have been born or died. In the event of death, an outdated estate plan can lead to confusion and disputes among family members.
This could lead to wasting unnecessary expenses in probate court. It may also result in assets being distributed in ways that do not reflect your wishes. To avoid these issues, it’s essential to work with an experienced attorney.
It may be that you decide to relocate to another state or country. In this scenario, it could have significant implications for your estate plan if you pass away or become incapacitated. You’ll therefore need to update your will and trust documents etc.
Laws governing estates vary by jurisdiction, so you’ll need to review and update your documents accordingly. For example, some states have different rules regarding probate, while others impose inheritance taxes that may affect how much your heirs receive.
Seniors and Children with Disabilities
For seniors, it may mean updating beneficiaries or expressing their healthcare wishes clearly in a living will. For children with disabilities, their care needs may change as they grow older (and require different levels of assistance).
If these desires aren’t legally set out, family members may find themselves in legal battles after a loved one’s passing. Let’s assume a disabled child’s care needs have changed, but the estate plan hasn’t been updated. In that emotive scenario, important decisions about their future could be left to chance.
Changes in Assets and Liabilities
If you acquire new properties or sell existing ones, this could have an impact on who receives what in your will. Failure to update your estate plan could result in disputes among beneficiaries, or even legal challenges. Similarly, changes in business ownership can also have significant implications.
Perhaps your business has grown significantly since the last time you updated your plan. If so, it may be necessary to revise how ownership shares are divided among family members or other stakeholders. This is particularly important if there are multiple owners of the business, and you want to ensure a smooth transition of ownership upon your passing.
Additionally, changes in liabilities can also affect your estate plan. If you incur new debts or pay off existing ones, this may impact the number of assets available for distribution among beneficiaries. You’ll need to factor in all outstanding debts when creating an estate plan, to avoid any surprises later on.
Changing Tax Laws
Changes to the estate tax exemption can affect how much of your estate will be subject to taxes upon your death. If you don’t update your plan accordingly, your loved ones could end up receiving less than you wanted.
Additionally, changes in income tax laws can impact your estate plan. Let’s assume there are changes in the capital gains tax rates or rules on qualified dividends and long-term capital gains. If so, it may be necessary to adjust how assets are distributed among beneficiaries, or within a trust structure.
You should also think about reviewing beneficiary designations for IRAs, 401(k)s, and life insurance policies. By keeping your estate plan current you can enjoy greater peace of mind. Should something happen, you’ll be confident that your wishes are fulfilled, and that the right people are cared for.