Estate planning involves deciding how and who will manage or inherit your assets after death or incapacitation. Contrary to popular practices, it should not be a one-time event. It is a good practice to keep updating it as changes happen in your life.
Why You Should Update Your Estate Plan
Typically, estate planning documents do not have an expiration date; they stay in place until executed as stated in the plan. Despite this, experts advise reviewing your estate plan every three to five years. Consider speaking to estate planning attorney Jason Barlow for further information.
Even though your life might not have changed significantly, the law might have. The legal world is dynamic, and an outdated document may suffer from new laws and federal estate tax adjustments.
Therefore, updating your estate plan ensures that all your affairs are in order and will still be in order even when you are not around. Hence, it should be reviewed frequently to ensure it does not suffer unintended financial effects.
When to Update Estate Plans
As mentioned before, it is important to keep your will updated with every important event happening in your life. However, most estate planning attorneys will ensure the plan is broadly written to reduce frequent updates. It is only necessary to update your will when important or life-changing events have taken place. Below is a summary of some situations requiring an estate update:
Children
It may be time to update your will if you recently had a child through adoption or birth. As a parent, you want to ensure your children are cared for even after death. Therefore, it is important to include them in your estate plan as soon as they join the family.
If the children are minors, you are required to name a personal guardian who will take care of them and the property they have inherited. You may choose to have the guardian perform both tasks or name a different person, probably a financial expert, to help with asset management.
Finally, set up a trust for your children with a trustee who oversees its use until the children are of age.
Marriage
If you recently married, updating your will stating which assets you would like your spouse to inherit is vital. In community property states, your spouse is entitled to inherit half of your property. In other states, they can inherit anything from a third to a half of your total assets.
In Virginia and North Carolina, which are equitable distribution states, marital property is divided fairly but not necessarily equally in the event of divorce or death. In terms of inheritance, intestate succession laws determine how the deceased’s property is distributed, with the surviving spouse typically inheriting a portion of the estate based on various factors.
These laws ensure that your spouse is protected after death, especially if you do not have an estate plan. However, it is advisable to explicitly write a will allocating part of your assets to them. After marriage, you may want to update the person in charge of managing your estate if you are medically determined to be incapacitated.
Divorce
Divorces are complicated, and it is best to update your will as soon as possible. Failure to do so could jeopardize your estates after your death. Some states may follow the original will, while others may revoke it.
It is best to make the update since leaving it to the courts could be challenging. As you update your will after a divorce, ensure that you are in line with your divorce and marital settlement agreement. The agreement often determines property rights and could affect the changes made in your will.
Other events that may require an estate update are:
- Moving to another estate
- Terminal illnesses
- Your estate or liabilities change
- An outdated retirement plan
- Executors or trustees become inappropriate
- Death of beneficiaries or trustees
How to Update an Estate Plan
An effective and comprehensive estate plan protects your assets, ensures that your wishes and instructions will be honored, and preserves your legacy.
Updates may require new separate writing to be added to the existing ones or an entirely new set of documents. Your attorney will help you make these adjustments as you desire. Similarly, when significant changes happen, like death or divorce, and you need to remove a major beneficiary, consult your attorney, as they will help appropriate the updates.
