Congratulations! If you actually have a trust or will, that separates you from about 74% of Americans who do not. Your thinking ahead, and that is good.
However, most estate planning documents need to be taken out of the box, dusted off and reviewed once in a while. Life is full of changes. These changes affect not only your life, but what you may want to have happen to your property at your death.
Here is a list of the top 5 reasons to update your will or trust, or at least take another look at it:
1. People Change
Your relationships with people named in your plan may have changed over the years. Frankly, you may no longer want to leave your jewels to your bridesmaid. You may have developed new relationships with people or even a charity or other organization for which you wish to provide after your death.
More importantly, major life events such as births, adoptions, and marriages may change what you want to have happen. Whether its your own marriage, a child’s marriage, or the birth or adoption of a child, your plan may need to be updated. It can also include births of grandchildren, nieces, nephews, the children of friends, etc.
If you have had a child since your plan was first written, it's recommended that you update your will or trust to add them and name a guardian or guardians in the event of your death. Also, if your children have reached the age of majority since you drafted your plan, you may need to revise certain bequests, or even name them as trustees or executors.
Has anyone named in your plan passed on? Heirs, representatives, guardians, trustees, or executors can die, or become incapable of handling their affairs. Consider whether the circumstances of these people have changed so that you no longer wish to include them in the same way.
2. Assets Change
If you have a trust, new assets you acquire must be added to the trust. It is not automatic! Real property must be titled in the name of the trust, and accounts should be held in the trust name.
If your estate has experienced a substantial increase or decrease in value, it is essential to take another look at your plan. If you have acquired or disposed of a major asset or started a business, you may need to make adjustments in how things are distributed or held.
You should also look at any insurance policies or pension plans for which you can name beneficiaries. Usually these things are not controlled by your will or trust, but are paid directly to a named beneficiary. If you divorce, or a named beneficiary dies, you will need to update this by filling out a new “designation of beneficiary” form.
3. Estate Plans are Affected by State Law
If you have moved out of the state in which you executed your plan, you should consult an attorney in your new location to determine whether it is still valid or if changes need to be made. While trusts are usually ok, the transfer of property is handled differently by some States. State laws regarding the execution of wills vary, and you shouldn't assume that your old will meets your new state's requirements.
4. Laws Change
Tax laws are constantly changing both on the state and federal levels, so you want to be aware of any changes that may affect your estate plan. Consulting an attorney who specializes in wills and estate planning is your best bet here, but you can also keep yourself informed as well.
5. Time Changes All
If you have not looked at your estate plan for three years or more, it is time for a review. Just looking at a checklist like the one provided below may remind you of something you wished to include or change. The best course of action is to return to your original documents, review them and make certain that all has been updated according to your changing needs.
An even wiser practice is to review your plan yearly. A good reminder is April 15th (think death & taxes). It is often a day to take stock of the financial year gone by, it's a good time to reconsider your plans and put your affairs in order.
One note on the passage of time--- you should also be aware of the age at which you are required to begin taking distributions from your IRA, 401(k), or other qualified plan (generally at 70 ½ years old). Before you reach this magic number, it's recommended that you review your estate plan.
Below is a checklist of common occurrences that can affect your estate plan. If you experience one of these, it's time to dig out your documents and have a look! ·
- Birth or adoption of a child/grandchild
- Death of someone named in your will
- Children have reached the age of eighteen
- A change in the circumstances of your executor, guardians, trustees, etc.
- You would like to provide for a charitable or other organization
- A significant increase or decrease in the value of your estate
- You have started a business
- A change in tax laws
- You are approaching the age at which you are required to begin taking distributions from your IRA, 401(k), or other qualified plan (usually 70 ½½ years old)
- You have moved out of state
- It has been three years or more since you have reviewed your will
Your estate plan is a way to protect your most precious assets. Without one, state law, not you determines what happens to your assets and even to your children.
John L. Gorman III is an experienced, estate planning attorney with offices in Modesto, California. He has been voted “Modesto’s Favorite Lawyer” in the Modesto Bee Poll three years in a row. He can be reached at (209) 548-4000.
This article represents only the general opinions of John L. Gorman III. It is intended only for general information and not as legal advice for any particular situation. If you want legal advice, you should contact a lawyer.