7 signs you need to make or revise an estate plan
If you don’t have an estate plan in place…get on that.
If you have one, good job you! But you’re not off the hook.
Estate planning is not a one-and-done type of thing, I’m afraid. Recommendations vary as to how often you should review your plan. Three to five years, or even every other year, are common suggestions. But life moves fast and it can be difficult to remember to do something you’ve already “done”. Especially when this thing happens to be something that probably makes you feel uncomfortable.
If you’re not the type of person who puts reminders on your calendar so far in advance, here are 7 signs you should take a moment to review your plan:
Your marital status changed. The nice thing is a lot of states have statutes on the books that say if you leave anything in your will to an ex-spouse, or if you named them in a power of attorney they are automatically treated as if they died before you. So whatever you gave them in terms of assets or powers lapses and goes to the next person in line. So why do I need to update my estate plan? Because not everything automatically changes, and state law varies. If you left your ex-spouse on your life insurance policy or your retirement account, they may still get it. And if you’re newly married you may want to assure your new spouse will get your assets if anything happens to you, and that they are empowered to make your health and financial decisions for you.
You’ve started a family. If you have or adopt children, you need to review your estate plan. At bare minimum you need to consider issues of guardianship: who will raise your child/children if the unthinkable happens. You may also need to adjust your plan to accommodate differences among your children - for example if one is special needs and receives public benefits and another does not - or perhaps to protect your child from themselves in the future if they have addiction or mental health issues. This is especially important in blended family situations. You and your spouse may agree on a particular arrangement for taking care of your respective children while you’re alive, but that doesn’t necessarily make it legally enforceable.
You received a serious health diagnosis. Let me be clear. If you receive a health diagnosis that you know will drastically shorten your life or will impact the quality of your life, take a beat and give yourself time to process that. Your estate plan probably isn’t your primary concern, and that makes perfect sense. But once the dust settles and you have an idea what your future holds, make sure the plan you have in place still reflects your wishes. You may need to adjust your plan to assure it aligns with your own care needs. If you know you have a condition which will affect your cognitive function such as Alzheimers, this is especially important. Your estate plan is as much for your own protection as it is for your loved ones.
Your financial situation changed significantly. Perhaps you’re one of those lucky few who won the lottery. Or maybe you received an unanticipated inheritance? If significant financial resources fall out of the sky, you should probably meet with both a financial planner and an estate planning attorney, especially one with expertise in tax planning. But even for more mundane events like the growth of your business, increase in the value of an asset you own, or an unexpected financial loss, you should make sure your plan still addresses your priorities.
You’ve acquired an asset you really care about. This may seem duplicative of the last sign, but it isn’t. It makes sense your plan might change if the VALUE of your assets changes. But this sign is about how you FEEL about a particular asset. Maybe you acquired a precious family heirloom after an extended legal battle, or you uncovered an asset that holds a lot of sentimental value for you and you want to direct who that asset will go to. Maybe you’ve become very attached to your business and you want to assure it will contine after you pass. Whatever the case, if you have a strong preference for how something is handled after you pass, make sure that is accounted for somewhere in your plan.
Your family dynamics changed/you changed your mind. I know, this is automatically conjuring up images of family turmoil and relatives who are disinheritance-happy in an effort to control family members’ behavior. As a general matter, it is best to keep the details of such disputes out of your will because it may be subject to probate and thus available on the public record. Few people enjoy airing dirty laundry in public. But apart from these more drastic situations, you may have a relative or friend who cared for you in your later years that you want to bestow an extra gift upon, or perhpas you have a grandchild or great grandchild you got close to that you weren’t close to when you first made your estate plan. Whatever the reason, if you’ve had a significant change of heart, make sure your plan reflects that.
You’re building a pattern. In very rare circumstances, where there is little doubt there will be disputes among family members about the distribution of assets, reviewing your estate plan could be a strategic maneuver. Executing a codicil - basically a supplement to the will which can explain or modify the will or a piece of a will - at regular intervals restating your intentions could lessen the chances a will contestant will succeed.