When it comes to estate planning, most people make two mistakes. The first is not having a Will or Revocable Living Trust, or omitting other key elements in their estate plan. The second mistake is failing to keep the estate plan up to date. When and why should you revise your estate plan? It’s often recommended that you and your estate planner review your estate plan at least once every three years. However, other events or life changes may prompt the need to revise your estate plan to keep your estate plan secure.
Moving to Another State
Estate laws vary from state to state. While some of these differences might seem trivial – such as needing a specific number of witnesses to validate a will or Trust – others are more significant. For instance, the minimum share of an estate that a spouse should inherit differs from state to state.
Other elements of estate plans can also vary, such as powers of attorney, inheritance taxes, and more. If you are getting ready for a move – or have already moved – across state lines, it is a good idea to review your estate plan to see what needs to be revised.
New Relationship Dynamics
Changes in relationship dynamics accompany changes in life. Some of these circumstances may be joyful, such as the birth of a new child or grandchild. In such a case, you would want to revise your estate plan to include these new family members to avoid potential lawsuits and conflicts. Meanwhile, other changes may be more somber. These can include death or divorce within the family, or perhaps you might have to disinherit one of your heirs.
Changes in Assets and Liabilities
If the value of your assets has changed significantly, it is definitely time to review your estate plan. You will need to assess how your property was divided prior and see if this is how you still want to allocate your asset now that its value has changed. If any element of your estate has also changed, it is a good idea to review your plan again. One such change may be the selling of an asset that was once a major part of the estate.
Outdated Qualified Retirement Plan
Failing to update beneficiary designations of retirement plans such as your IRA and 401(k) is another common mistake in estate planning. Beneficiary designations control who will receive your life insurance, annuities, and various other assets. It is important to review these designations periodically to ensure that they are updated and still reflect what you desire.
Inappropriate Executors and Trustees
Your trustees and executors implement your plan and are the key factors in determining its success. It is thus important to ensure that these executors and trustees are still appropriate. While some people may have carefully considered the initial appointment of these individuals, circumstances might have changed in the intervening years. Take a look at the executors and trustees that you have appointed. Are they still able and willing to execute the tasks in the way that you would like? Do changes in your estate mean that they are no longer suitable for the task, or that someone may be more suitable? Consider these questions, and the other variables we have listed above, when it comes to your estate planning.
