Dear Blake: My husband and I did our estate planning back in 2013. We created a family trust, and we each signed wills, powers of attorney, and living wills. A lot has changed since 2013. Our kids are all done with college and we bought a new house in 2017. We have our first grandchild on the way, too. Time is flying. Since we already created a trust and signed the other documents, does our estate plan need an update? When would you recommend reviewing our plan with our estate planning attorney? Sincerely, A Purposeful Planner
Dear Purposeful Planner: Estate planning is an ongoing process that continues after the initial documents are executed. This remains true even if frequent modifications to your plan are not needed. Many estate planning instruments, like revocable trusts, wills, and powers of attorney can be updated at any point as long as the creator has the capacity to do so. Having capacity generally means that the signer of the document understands what they’re signing, the extent of their assets, their familial relationships, and the effects of the instruments in question. As an estate planning and probate attorney, I recommend reviewing your estate plan, including how your assets are titled and who are beneficiaries on your accounts, every 3 to 5 years. Major changes in your family dynamic and financial picture often provide guidance as to when you should update your estate plan.
Now, let’s take a closer look at some of the circumstances that may indicate it is time to review and update your estate plan to ensure that it continues to reflect your wishes and meet your goals.
Age & Health of Family Members
Since family members are typically named as beneficiaries and often serve as trustees, executors, and agents under powers of attorney, their age and health should be considered when determining whether to update an estate plan. For example, a child reaching adulthood and living independently could mean that they are responsible enough to act as a trustee or receive a gift outright and without age restriction. In contrast, a parent or older family member may need to be removed from a trustee, executor, or agent position if they are in poor health. If any family member named in estate planning documents dies, a plan review would be appropriate.
Marriage & Divorce
Marriage and divorce are signals to update your estate plan. Newlyweds should consider how their spouse fits into their estate planning goals moving forward, particularly if it is a second marriage for either spouse. An estate plan should be updated after a divorce to ensure that a former spouse does not receive any unintended gifts and that someone you trust is filling an important role. If children or other family members named in your trust, will, or other estate planning documents are getting married or divorced, you should still consider updating your plan. Occasionally in-laws are named in estate planning documents as beneficiaries, trustees, or in another capacity. A review after a relative’s divorce is vital to protect against your assets flowing to someone that is no longer part of the family.
Significant Financial Changes
If your financial picture changes significantly, an estate planning audit is in order. Examples of major financial changes include buying a new home, starting a business, receiving a large inheritance, and anything else that materially changes your net worth or the makeup of your assets. Major financial changes call for an estate plan review for several reasons. First, newly acquired assets should be titled in a way that fits with your planning goals. Failing to title new assets properly could negate the intended effects of your trust or will. Second, changes in income or net worth may have tax consequences that necessitate modifications to your current estate plan or the drafting of supplementary planning documents to minimize your tax liability. Third, certain assets, like rental properties and closely-held business interests, tend to raise liability concerns. Becoming a landlord or business owner may raise additional planning considerations, including whether changes to your estate plan or asset ownership structure may be appropriate in light of those potential liabilities.
If it has been more than five years, your family structure has changed, or your financial picture looks different, it may be time to review your existing plan with experienced estate planning, tax, and, if necessary, business attorneys to determine if updates are necessary.
For more information on updating your estate plan, or to seek counsel from our Trusts & Estates practice group, please request a consultation or call us at 216-696-1422.
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The information contained in this blog post is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.
