When Should You Review Your Estate Planning Documents?
First, let’s clarify what your estate planning documents are. Of course, they include your Will and any Codicils, and perhaps your trust or trusts. But they also include any powers of attorney (both financial and health care) as well as all beneficiary designations for life insurance, retirement plans, annuities and transfer on death accounts. A thorough review of your estate planning documents will include an update of how all your assets are titled. Finally, you should re-familiarize yourself with any notes, ante-nuptial agreement, divorce agreement, corporate stock restriction agreements, partnership agreements, and limited liability company operating agreements to which you may be a party so that you are aware of any contractual obligations to which your estate may remain obligated after your death.
Most people address their estate planning documents in response to a crisis, such as the death of a loved one. While this understandable, I would advise that you consider your estate plan with a more measured frame of mind, as a significant component of your financial well-being rather than a periodic date with the grim reaper. There are at least three circumstances that warrant a review that you should initiate rather than having it forced on you.
CHANGES IN THE LAW
The most expensive changes in the law that may affect your estate plan are changes in the federal estate and gift tax codes. Changes in the income tax code can affect an estate plan as well, but in general do not have the same impact in dollars. Changes in your state’s probate code, trust law, and the laws of descent and distribution may impact your estate plan. Staying in touch with your financial and estate planning professionals, subscribing to financial newsletters and publications, and attending seminaries on planning issues can alert you to these types of changes.
CHANGES THAT HAPPEN TO YOU
Your spouse dies. Children beget grandchildren. You are diagnosed with a disease. Aging causes you to have to move from your home. You turn 70 ½. You receive an inheritance. A child dies, or a grandchild suffers from a disability. All of these events, though you did not cause them to happen, are common events that do happen to folks. Each of these examples can cause you to need to reexamine your estate planning documents. For example, if a child predeceases you, you may need to replace that child as a names attorney-in-fact, restructure that child’s share which may now go to minor grandchildren, or even amend your estate plan to provide for the spouse of the deceased child.
CHANGES THAT YOU INITIATE
You move to another state. You retire. You remarry. You divorce. You restructure your investments. You decide to act on your fondness for your favorite charity. Each of these should result in your revisiting your estate plan. For example, if you want to provide for a charity after your death, once children are grown and are provided for (or have provided for themselves) you need to reallocate how your estate will pass or designate certain assets to the charity. There may be substantial estate tax savings, and even income tax savings, associated with a charitable gift. There are instruments that can even increase your income during your lifetime while setting aside a charitable gift. Revisiting your estate planning documents because you have modified your goals can be a very creative and satisfying process.
In summary, when you notice a major change in the law, when change happens to you, and when you decide to make significant changes in your life, you should review your estate planning documents to make sure that your estate plan is still in sync with your life.