When Should You Update Your Estate Plan? Key Life Events to Consider
As someone who has been practicing estate planning law for years, I understand how important it is to have an updated estate plan. Whether you have a will, a trust, or a comprehensive plan that includes both, the truth is that life changes often require adjustments to your estate plan.
If you’re unsure whether it’s time to update your estate plan, I’m here to guide you through key life events that should prompt you to take a closer look at your documents.
At Edington Law Firm, Inc., I’ve helped countless individuals and families make sure their estate plans reflect their current life situation. Updating your estate plan is a crucial part of protecting your loved ones and your assets. As we explore the following life events, you’ll see why it's essential to stay proactive and revisit your estate plan regularly.
Major Life Changes: Marriage, Divorce, and Remarriage
One of the most common life events that necessitate an update to your estate plan is marriage. If you’ve recently tied the knot, you may want to make sure your spouse is properly included in your estate plan, whether through changes to your will or trust, or adjustments to your beneficiary designations.
If you’re combining assets or if your spouse’s health or financial situation has an impact on your estate, these factors should be considered.
On the flip side, a divorce is another life event that can dramatically affect your estate plan. Many people forget to update their documents after a divorce, which can lead to unintended consequences, like an ex-spouse receiving a portion of your estate or having control over key decisions.
I always recommend reviewing your estate plan immediately following a divorce to make sure your new wishes are accurately reflected.
Similarly, if you remarry, your estate plan should be updated to reflect your new spouse, particularly if you have children from a prior relationship. Consider what assets you wish to leave to your new spouse versus children from a previous relationship.
Estate planning becomes particularly important if you have blended families, as you want to make sure that everyone is accounted for.
Having Children or Grandchildren
When you have children, your estate plan should reflect your desire to protect them. Having a child is a life-changing event, and your estate plan should be updated to include provisions for guardianship if something happens to you.
If your child is a minor, you may also want to establish a trust to protect their inheritance until they reach an age where they can manage it responsibly.
As your children grow and become independent, your estate plan may need adjustments. For example, if they become financially successful or have children of their own, you may want to update your beneficiary designations or review the asset distribution to make sure that it’s fair and in line with your intentions.
Similarly, grandchildren are another reason to revisit your estate plan. If you want to include them in your will or trust, it’s important to make sure they’re listed correctly. You may even want to consider setting up a college fund or a trust to assure their future security.
Adding or removing beneficiaries from your estate plan should always be done with careful consideration, so that your assets are protected and distributed according to your wishes.
Retirement and Changes in Financial Circumstances
As you approach retirement, it’s important to review your estate plan to make sure it aligns with your current financial situation. Your retirement savings, whether through an IRA, 401(k), or other investment accounts, can play a significant role in your estate.
You may want to make sure that you’ve named the right beneficiaries and have taken advantage of any tax-saving strategies that could benefit your heirs.
Similarly, any substantial changes in your financial situation – whether through an inheritance, large purchase, or sale of property – should prompt you to update your estate plan. These changes could affect how your assets are divided and who should receive them.
If your financial situation has changed significantly, consulting an estate planning attorney will help you make the necessary adjustments.
Death of a Spouse or Loved One
The death of a spouse or another significant person in your life is one of the most emotional and impactful events. Along with grieving, it’s important to revisit your estate plan. If you’ve recently lost a spouse, you may want to remove them from your estate plan, update beneficiary designations, and adjust the distribution of assets.
A deceased spouse may have been listed as your primary beneficiary or as your decision-maker in the event of incapacity, so these documents should be updated as soon as possible.
If the deceased person played a significant role in managing or distributing your assets, you may need to appoint a new executor or trustee. Similarly, if you’ve lost someone who was a beneficiary, you should determine how their share will be distributed among other beneficiaries or if you need to make any changes to reflect new priorities.
Moving to a New State or Country
If you’ve moved to a new state or country, it’s essential to update your estate plan to comply with the laws of your new location. Every state has its own estate planning rules, and what was valid in your previous state may not be recognized in your new one.
For example, California law may be quite different from other states in terms of how estates are handled, so it’s essential to make sure that your documents are legally compliant in your new jurisdiction.
Additionally, moving to a new state or country may impact taxes or how assets are distributed. There may be different laws regarding property and estate taxes, or how property is owned, especially if you now own real estate in multiple locations.
If you’ve moved out of the country, your estate plan might need significant updates to comply with international estate planning laws.
Significant Health Changes or Long-Term Care Planning
Health changes, such as a serious illness or injury, can be a major turning point in your life. If you’re facing significant health challenges or planning for long-term care, updating your estate plan is critical. Here are some key documents to consider when making updates:
Advanced directives: These outline your medical care preferences if you become unable to communicate your wishes.
Powers of attorney: Appoint someone to make important decisions on your behalf if you’re incapacitated.
Living wills: Specify your wishes regarding life-sustaining treatment and end-of-life care.
Healthcare proxy: Designate a trusted person to make medical decisions for you in case you can’t.
Regular updates: Review and update these documents regularly, particularly as your health situation changes.
If you’re entering a period where you need long-term care, it’s also essential to update your estate plan to protect your assets and make sure that they’re used appropriately. Medicaid and other assistance programs may require certain steps to protect your estate, so working with an attorney can help you traverse these considerations.
Sale of a Business or Major Asset
If you own a business or have recently sold a significant asset, it’s crucial to revisit your estate plan. A business can represent a significant portion of your estate, and selling it could change your financial situation dramatically. You may need to update the beneficiaries of your business or the distribution of proceeds from its sale.
Additionally, if your business has a succession plan, you may want to revisit that as well to make sure that the right people are designated to take over the business in the event of your death or incapacity.
Similarly, the sale of a large asset, such as real estate or investments, may require adjustments to your estate plan. Consider the following factors when determining how to handle the proceeds:
Distribution to beneficiaries: Decide how the proceeds will be divided among your beneficiaries.
Funding a trust: Consider using the proceeds to fund a trust, assuring ongoing management of the assets.
Creating a financial vehicle: Determine if a financial vehicle, such as a charitable donation or a life insurance policy, should be established to benefit your loved ones.
Tax implications: Evaluate the potential tax consequences of selling the asset and how it impacts the distribution plan.
Estate Plan Review Every Few Years
Even if you haven’t experienced one of the significant life events mentioned above, it’s still a good idea to review your estate plan every few years. This regular review makes sure that your plan is still aligned with your current wishes and that it complies with any legal or tax law changes.
Life moves quickly, and you want to make sure that your estate plan remains a true reflection of your intentions.
Contact Me Today
At Edington Law Firm, Inc. in Modesto, California, I understand how important it is to keep your estate plan up to date. Whether you’re facing a major life change or just want to make sure your plan is current, I am here to help. I serve Modesto and central California. Reach out to me today to schedule a consultation and make sure your estate plan reflects your wishes and protects your loved ones.