Twelve Reasons to Update your Estate Plan

Clients know they are supposed to review their estate plans, but don’t know when to do it. Here are twelve times when it makes sense to review your plan.

Estate planning lawyers hear it all the time—people meaning to update their estate plan, but somehow never getting around to actually getting it done. The only group larger than the ones who mean to “someday,” are the ones who don’t think they ever need to update their documents, says the article “12 Different Times When You Should Update Your Will” from Kiplinger. The problems become abundantly clear when people die, and survivors learn that their will or trust is so out-of-date that it creates a world of problems for a grieving family.  For the purposes of this article I’ll focus on property planning, meaning wills and trusts, but there are lots of other reasons to review and update your entire estate plan.

There are some wills and trusts that do stand the test of time, but they are far and few between. An obvious example is that some people shift from wills to trusts as their primary estate planning vehicle.  Families also undergo all kinds of changes, and those changes should be reflected in the will or trust. Here are twelve times in life when wills and trusts need to be reviewed:

Welcoming a child to the family. The focus is on naming a guardian and a trustee to oversee their finances. The will and trust should be flexible to accommodate additional children in the future.  In some cases, a new child may disrupt the estate plan if no provisions are made for them.

Divorce is a possibility. Don’t wait until the divorce is underway to make changes. Do it beforehand. If you die before the divorce is finalized, your spouse will have marital rights to your property. Once you file for divorce, in many states you are not permitted to change your estate plan, until the divorce is finalized. Make no moves here, however, without the advice of your attorney.

Your divorce has been finalized. If you didn’t do it before, update your estate plan now. Don’t neglect updating beneficiaries on life insurance and any other accounts that may have named your ex as a beneficiary.

When your child(ren) marry. You may be able to mitigate the lack of a prenuptial agreement, by creating trusts for your beneficiary, so anything you leave your child will be protected in the case of their divorce.

Your beneficiary has problems with drugs or money. Money left directly to a beneficiary is at risk of being attached by creditors or dissolving into a drug habit. Updating your estate plan to includes trusts that allow a trustee to only distribute funds under optimal circumstances protects your beneficiary and their inheritance for both themselves and for later beneficiaries.

Named executor, trustee or beneficiary dies. Your old will or trust may have a contingency plan for what should happen if a beneficiary, executor or trustee dies, but you should probably revisit the plan. Many times, clients have one answer for what happens if a fiduciary or beneficiary die while it is hypothetical, but feel differently once it happens.  If a named executor or trustee dies and you don’t update the estate plan, then what happens if the second dies?

A young family member grows up. Most people name a parent as their executor or trustee, then a spouse or trusted sibling. Two or three decades go by. An adult child may now be ready to take on the task of handling your estate.  This is one of the most obvious and common reasons for a younger client to update their estate plan.

New laws go into effect. In recent months, there have been many big changes to the law that impact estate planning, from the SECURE Act to the CARES act. Ask your estate planning attorney every few years, if there have been new laws that are relevant to your estate plan.  It is also a great idea to subscribe to legal blogs (like this one) to stay up to date on changes.

An inheritance, windfall or downfall. If you come into a significant amount of money, your tax liability changes. You’ll want to update your will, so you can do efficient tax planning as part of your estate plan.

Can’t find your will and/or trust? If you can’t find the original documents, especially with the will, then you need new documents. Copies of wills may only be probated with extra steps, so it is far better to redo the documents which will also serve to update it legally.

Buying property in another country or moving to another country. Some countries have reciprocity with America. However, transferring property to an heir in one country may be delayed, if the will needs to be probated in another country. Ask your estate planning attorney, if you need wills for each country in which you own property.  It is also worth considering changes if you acquire real property in a new state which may require probating in two states.

Family and friends are enemies. Friends have no rights when it comes to your estate plan. If you suspect that your family may push back to any bequests to friends, consider adding a “No Contest” clause to disinherit family members who try to elbow your friends out of the estate.

In all cases, it is important to review your estate plan every few years, but looking for these reasons to update our estate plan will help.  Changing your estate plan is also not as involved as one might think.  Changes to wills often require a new will, changes to trusts take a variety of forms (see here https://www.galliganmanning.com/amending-a-trust-what-are-your-options/) but are often not very involved.

If you haven’t reviewed your estate plan recently or need assistance with a review or updates, please call our office today.

Reference: Kiplinger (May 26, 2020) “12 Different Times When You Should Update Your Will”