Creating your estate plan took a considerable amount of time, but it was a relief knowing that you could check off that crucial task on your to-do list. And now it’s probably stored away in a safe place until it’s needed.
But if you think an estate plan is a one-time thing, you would be wrong. Having an out-of-date estate plan is almost as bad as not having one at all.
Life is full of changes
Your estate plan is like an instruction manual. It dictates how you want your assets managed and distributed, ensuring your final wishes are honored. Beyond your will, your estate plan also authorizes trusted individuals to make financial and medical decisions on your behalf if you become incapacitated.
Your estate plan reflects your current priorities and circumstances, but these things change throughout your life. By not updating your estate plan, you run the risk of unintended consequences, including:
- Assets distributed to unintended beneficiaries
- Family disputes among heirs
- Your estate incurs unnecessary tax liabilities
Certain life events should trigger a review of your estate plan, such as:
- Marriage or divorce: Upon marriage, you may want to add your spouse as a beneficiary or name them as power of attorney and healthcare proxy. Conversely, divorce may prompt you to remove your ex-spouse from legal documents, investment accounts and insurance policies.
- Addition to the family: You want to protect your new child’s financial future. Adding them as a beneficiary, naming guardians and establishing a living trust ensures that your child will be cared for in the event of unexpected circumstances.
- Significant changes in finances: Receiving an inheritance, starting or selling a business or acquiring new assets necessitate a plan review. This ensures that your heirs aren’t stuck with a significant tax liability.
- Relocation: Every state has its own laws regarding estate planning. Relocating to another state or country may require adjustments to your estate documents so they are legally compliant.
- Loss of a loved one: If the person you named as executor, power of attorney or a beneficiary passes away before you do, you will need to update your estate plan and name someone else in their place.
If it’s time to review your estate plan, be sure to contact a legal professional. They are knowledgeable about your state’s laws and any changes to the tax code. They will work with you so that your estate plan reflects your current wishes. You will once again have peace of mind knowing that your loved ones will be taken care of.