When Should You Update Your Estate Plan?
Your life is constantly changing, so your estate plan should change with it. Major life events, such as the ones listed below, should prompt you to take your estate planning documents out of the drawer, and give them a read through to make sure they still accurately reflect your wishes.
Marriage or DivorceThe last thing you may want is your ex-spouse inheriting your assets. The good news is that if you signed your Will prior to your divorce, Connecticut law provides that your spouse forfeits their right to inherit under your Will and also forfeits their right to serve in a fiduciary capacity (ex. executor, trustee, etc.). However, this law may be superseded by your divorce decree and may also not apply to any financial accounts on which you may have named your former spouse as the primary beneficiary (ex. retirement accounts, life insurance policies, etc.). For these reasons, it is highly recommended that your estate plan be reviewed by an estate planning attorney following a divorce.
Alternatively, if you’ve just gotten married, chances are you had previously named your parents or siblings as the beneficiaries of your estate plan. With a new spouse in the picture, it likely makes since to update your estate plan to name your spouse as the primary beneficiary.
Births or DeathsThe birth of children can greatly impact your estate plan, and it may not be as simple as just naming them as beneficiaries. You may wish to establish a trust for their benefit to prevent them from receiving a large inheritance while they are still young and/or financially immature. You may also wish to consider appointing a guardian for your children should you pass away when they are still minors.
Grandparents may likewise wish to make specific bequests to their new grandchildren to assist with paying for college, buying a home, or other major life events.
The death of any individuals named in your estate planning documents should also be addressed. For example, if you’ve named your spouse as the primary beneficiary under your Will and your spouse has predeceased you, you should confirm that your Will provides for alternate beneficiaries, such as your children. You should also confirm that you have named an alternate executor in the event you had chosen your spouse to serve in that capacity.
Change in Your Financial SituationHave you received an inheritance from your parents or gotten a substantial raise at work? If so, the primary question on your mind may be how to invest your newfound windfall. However, consideration should also be given to how this change in your finances may affect your current estate plan. Now that you have more assets, you may wish to include bequests to your favorite charities or your alma mater in addition to providing for your family.
Alternatively, what if you have been forced to spend down the bulk of your assets on long term health care costs? If your prior Will made bequests to several individuals (ex. $10,000 to each of my grandchildren), there may no longer be enough money in your estate to fund these bequests.
Passage of TimeEven if there have not been any major changes in your life, the passage of time alone may make a review of your estate plan necessary.
Firstly, over time laws can change. It is important to ensure that your documents are in line with any new laws that may have been implemented by the state or at the federal level. For example, Connecticut recently enacted new laws increasing the amount of the Connecticut estate tax exemption. If you executed a Will or Trust several years ago when the estate tax exemption was much lower, your documents may include a substantial amount of complicated provisions designed to avoid payment of potential estate taxes that are now no longer necessary. With the newly increased estate tax exemption, it may be possible to eliminate such complicated provisions and simplify your estate plan.
Secondly, the more recent your documents, the less likely you will have any issues with their acceptance. For example, as a general rule, it is advisable to update powers of attorney and health care directives every five years. While the documents themselves never expire, hospitals, banks, or other financial institutions are sometimes reluctant to accept these documents when they have not been updated in several years. If your documents were executed many years ago, they could be considered “stale” and may not be immediately accepted. Periodically updating these documents can avoid any such potential staleness issues.
In the end, it is important not to view estate planning as something you only do once. It is an ongoing process that will periodically require updates and revisions. So don’t just “set it and forget it.” Instead, set it and revisit it every few years. It may not be as catchy of a slogan, but it will ensure your estate plan keeps pace with your ever changing life.