Why Should I Update My Estate Plan?

Your estate plan – like your home – could probably use some organization! After all, life is unpredictable, and an estate plan that met your needs just a few years ago may now be cluttered with outdated provisions or documents.

But why is it important to keep up to date with your estate plan? For starters, it’s necessary to ensure that your estate plan will still target your goals, as well as avoid unintended consequences that may result from divorce, deaths, births, or any other significant life changes.

If you’re asking, “Should I update my estate plan?” We’ve got some helpful tips for you! Below are a few considerations worth discussing with your estate planning attorney, so that any essential changes can be made promptly to ensure an up-to-date estate plan.

Have your children reached adulthood?

While it might seem like you were changing diapers just yesterday, time passes quickly! If your children are no longer minors, your estate plan should be revised to include them (if so desired).

For one thing, if your children are adults, you no longer need to include the name of an established guardian in your plan. Whoever you originally named caregiver in your estate plan will now be irrelevant for that role.

Additionally, once your children are of age, you may want to adjust your estate plan to take their personalities and needs into account. For example, if one child tends to be irresponsible with money or has developed an addiction, a trust permitting distributions only for the child’s health, education, support, or welfare may be a better option. Moreover, if one of your children has a lower-paying job compared to another who is well-off, it may be desirable to adjust the amount that each will inherit to make up for any discrepancy.

Finally, if your children have families of their own, you may want to include your grandchildren in your revised estate plan.

Do you need to name different fiduciaries?

Your estate plan may be impacted by more than just life circumstances. If your fiduciary (e.g., executor, trustee, or agent under a power of attorney), has died, moved out of the country, or changed his or her name, you will need to revise your estate plan to designate a new fiduciary or reflect such changes.

In the event that your fiduciary decides they are no longer able or willing to serve in the role, it is also a good idea to designate other candidates who can serve if your fiduciary is unavailable. Should this be a precautionary measure you take, it’s important to verify that your alternates are still available and willing to act, if necessary.

If your primary fiduciary is not available when you pass away – and you have not named an alternate – it will fall to the court to appoint a candidate for the role, and it may not be someone you would have chosen.

Has your spouse passed away?

If your spouse has died, it is especially important that you review and revise your estate plan accordingly. Below, we’ve listed a few of the changes that you may need to incorporate into your estate plan to ensure that you and your family are on track for the future.

• Is your spouse one of the main beneficiaries of your will, trust, retirement account, or life insurance policy? If so, update the beneficiaries of those documents as soon as possible.
• If you named your spouse your successor trustee, your agent under a power of attorney, or your health care proxy, you’ll need to designate another trusted person to fill such roles.
• Tax issues might also be discussed with your estate planning attorney. If you and your spouse collectively owned extensive wealth and property, you may want to consider filing a Form 706 on behalf of your estate. Form 706 refers to the United States Estate and Generation-Skipping Transfer Tax Return, and you have nine months from the date of your spouse’s death to apply their unused estate and gift tax exclusion to your own transfers. This can potentially exclude a very large amount of money and property from your taxable estate, as the total exclusion for married couples in 2020 was $23.16 million.
• If you and your spouse both owned the same properties with a right of survivorship, the property automatically became yours upon your spouse’s passing. Although a new deed is not required, you may choose to file their death certificate, or an affidavit in the county real estate records office, providing notice of the transfer. If you did not receive full ownership of property(ies) at the time of your spouse’s death, an executor’s deed conveying the property to the heir will provide evidence that the deceased is no longer an owner of the property.

How will recent changes in retirement laws affect your beneficiaries?

A new law called the SECURE Act could have a significant impact on your non-spouse beneficiaries. Your estate planning attorney will be your go-to person for discussing and understanding the potential consequences of the Act on your estate plan.

One such example of the SECURE Act’s impact on your estate plan is, if you have named your children as beneficiaries of your retirement account, they will now have to withdraw the entire balance of the account within ten years of your death; previously, they could “stretch” distributions throughout their lives (as permitted under previous legislature). This change will, unfortunately, result in more income tax due upfront, which could push your children into a higher tax bracket and eat up more of their inheritance than you’d anticipated.
In addition, if you created a revocable living trust or standalone retirement trust with conduit provisions, it will no longer provide long-term asset protection and growth. This is because the trustee is now required to distribute the entire balance to most beneficiaries within ten years of your death.

If this is a concern for you, you should discuss alternative trust structures with your estate planning attorney. One option you might consider is an accumulation trust, which can provide longer-term protection for your beneficiaries.

It’s a good idea to review and confirm your retirement account information regularly to ensure that your beneficiary designation forms are filled out correctly. You should verify that you have named an individual or trust as your primary beneficiary, and ensure that you have also named contingent beneficiaries.

Don’t Sweep an Outdated Estate Plan Under the Rug

So – why update your estate plan?

The bottom line is that if you don’t modify your estate plan from time to time, it could result in a needlessly big mess for your loved ones that adds further stress to their mourning period at the time of your death.

Call us today to schedule an appointment so we can review and amend your estate plan to ensure that all of your affairs are in order.