There are many different documents that can make up an estate plan. Some of these documents include last wills and testaments, a living will, a revocable living trust, power of attorney, and even a digital estate plan.
Having an estate plan can give you peace of mind that you’ve taken the necessary steps to protect your loved ones in the event that you pass away, or enable them if you aren’t able to take make decisions on your own anymore.
But the estate planning process isn’t a one-time thing. Life brings changes and your estate planning documents will need to change with it. If your plan isn’t revisited and revised, then it may not accomplish the goals that you want it to.
So when is it appropriate to update your estate plan?
When You Should Update Your Estate Plan
It may seem pretty obvious, but the best time to update your estate plan is when you have any major changes in your life.
Some common life events that can spur revisiting the documents include:
Marriage And Divorce
Whether you’ve just tied the knot or parted ways with your spouse, you should review your estate plan.
Make sure your new spouse is included in your estate plan or your ex-spouse is removed from it. Do this as soon as possible to ensure your finances are in line with your wishes.
If you pass away before your estate plan documents are updated, you risk your assets being distributed in a way that you wouldn’t want. For example, if you get a divorce and pass away before your will is updated, your ex-spouse may be entitled to some of your assets.
Children
One of the most common reasons for updating an estate plan is changes that occur within a family such as having a new baby, adding stepchildren, or your children simply getting older.
If you’ve remarried and had children from your first and second marriage, you will want to address this in your estate plan. This also goes for any stepchildren that you would like to include in the distribution of your estate since they’re usually not included by default.
If your children have reached the age of 18 or the age of majority in your state, they no longer need to have a guardian and this language can be removed from the documents. You may also wish to add your adult children as your personal representative or durable/health care power of attorney at that time.
Named Individual (Fiduciary) Changes
When you review your estate plan, you should check the people you’ve listed that are going to be responsible for making decisions on your behalf. These include:
The individual(s) named above as your Personal Representative (and successors) will handle the settlement of your estate after you pass away. The term “executor” is an older word for the same role.
The individual(s) named above as your Trustee (and successors) will handle your trust assets while you are disabled and after you pass away. Assets that are not inside your trust will be handled by your Power of Attorney (next section) while you are still living.
The individual(s) named above as your Attorney-In-Fact and Health Care Representative (and successors) will make financial and health care decisions for you while you are still alive but unable to make such decisions on your own.
Federal, State, and Tax Law Changes
The tax law is constantly changing so this is something you will need to take into account with estate planning. Take for example the SECURE Act, which went into effect on January 1, 2020. Many individuals who own IRAs and 401(k)s will need to make changes in their estate plans to address the impact of that legislation on inherited accounts.
Also, if you move from one state to another make sure your documents follow all local and state laws. You should review your plan documents with an estate planning attorney in your new state to ensure compliance with all the laws of that state.
review Your Estate Plan often
Understandably, trying to remember to review your estate plan when things change isn’t always easy. The truth is, most people don’t keep their estate plan up-to-date all the time.
For this reason, it is good practice to review your estate plan every 3 to 5 years or set aside a specific time each year to do a quick check-in, such as the new year or during tax time.