An estate plan has the following three main objectives:
- To preserve your accumulated wealth
- To express who will receive your assets after your death
- To state who will make medical and financial decisions on your behalf if you cannot
Over time, your feelings about the above-mentioned objectives may change. For instance, you might want to have a new executor of your will or leave an heir a set amount of money. This is why it is important to review your estate plan periodically. The key is to know which life events may trigger a change. Here is a list of some major life events that may prompt you to take a look at and possibly change your estate plan:
You Just Got Married Or Divorced
If this is the case, your estate plan will absolutely need revision. For that matter, some, or all, of your will may now be legally invalid since some state laws strike down existing wills when a person becomes married or divorced. If your children or grandchildren marry or divorce, that also calls for an estate plan review.
There Has Been a Loss or Serious Illness in Your Family
If so, your named executor or healthcare agent may have to be changed. If one family member has now become physically or financially dependent on you, that too may be an occasion for a second look at your estate plan.
Your Net Worth Has Risen or Declined Substantially Since Your Estate Plan Was First Implemented
If you have become much wealthier in the past five or ten years (or lost a huge part of your net worth), that circumstance may have altered your vision of how you want your assets distributed at your death. Maybe you want to give more (or less) to charity or your heirs. A large inheritance can also prompt you to rethink your wealth protection and wealth transfer strategy.
You Have Changed Your Mind About What You Want Your Wealth to Accomplish
You may view your wealth differently now compared to when you were younger. New purposes may arise for it – new roles that it can play. Following through on those thoughts may lead you to reconsider aspects of your estate plan.
Your Executors/Trustees Have Changed Their Minds About Their Roles
If they are no longer interested in shouldering their responsibilities, no longer alive, or no longer of sound mind or reputable character, it is time to revise your estate plan.
You Have Retired, Moved to Another State, or Bought and/or Sold Real Estate
Since these are pretty major events, they all call for an estate plan check-up.
The first step in revising an estate plan is to update essential documents. Not just your will or your trust, but your financial power of attorney and healthcare proxy as well. Review all the names including your executor; your trustee and your healthcare agent. Changes in your personal (and even your business) relationships may call for alterations to those choices.
The second step is to review your risk management. Will language in your will need revision? Does a trust created years ago need to be modified or replaced? Do new estate planning vehicles need to enter the picture in order to help you adequately transfer wealth, counter estate taxes, or endow charities? What about your life insurance? Do beneficiary forms on your life insurance policies need updating? Will the policy payouts be sufficient enough to help your loved ones address financial issues after your death?
The third step is to make sure your assets are in sync with your plan. For example, if you have a revocable trust, have you transferred ownership of all the assets that are supposed to go into it? Have you acquired new assets that need to be added? If you are married and it appears certain that your estate will be taxed, you may want to own some assets and have your spouse own others. These are things you will want to discuss with an estate attorney.
Even if nothing major happens in your life, it is a good idea to review your plan every five years or so. While your life may be uneventful over five years, tax laws, the financial markets, and business climates may change significantly. Those kinds of shifts can impact your estate planning strategy. If you decide you need to make changes to any estate planning documents, seek help from a professional to make sure these changes are done correctly.
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