Have you established an estate plan? Have you reviewed it within the last five years? Have you experienced any major life changes since creating your estate plan? If you’ve already created a will or trust, it’s essential to review and update your documents periodically to ensure they still reflect your wishes. If not, you need to consider doing so sooner rather than later.
When Should You Update Your Estate Plan?
Major Life Events
Life changes such as marriage, divorce, the birth of a child, or the death of a beneficiary or trustee should prompt an estate plan review. These events can significantly impact your distribution plans and beneficiary designations.
Let’s consider a situation similar to Jane Doe’s. Jane came to me concerned about creating her estate plan to protect the important people in her life. Jane has two adult children, and is now living with a companion; they are not married. Jane owns her own home in California and has substantial financial assets. Jane was concerned about setting up her living trust and estate plan to ensure her companion could continue living in her home, while also protecting her children’s inheritance.
Relocation to a New State
If you’ve moved to California from another state, your previous estate plan may not comply with California law. It’s important to ensure your documents align with state regulations.
Changes in Financial Situation
Whether you’ve acquired new assets, started a business, or experienced a significant financial shift, your estate plan should reflect your current wealth and financial goals.
New Tax Laws
Estate and inheritance tax laws can change over time. Reviewing your plan ensures that you are taking advantage of any available tax-saving strategies.
Health Changes
If you or a loved one faces a serious illness or disability, updating your estate plan to include medical directives, guardianship instructions, or special needs trusts may be necessary.
Five Years Have Passed
Even without major life changes, it’s a good rule of thumb to review your estate plan every five years to ensure it remains up to date and effective.
Why Updating Your Estate Plan Matters:
Avoids Probate Issues
Outdated documents can create legal complications that result in costly and time-consuming probate proceedings. Many people establish a living trust (often referred to as a Marital Trust or Family Trust) which is the cornerstone of their estate plan. Upon passing, the trust allows for the transfer of assets without the need for probate. Trusts are administered privately, with less delay and less expense. The trust administration process provides less opportunity for a trust contest or interference by family members. A trust allows you to not only control who receives your assets, but when and in what manner your assets are distributed to your beneficiaries.
Protects Your Beneficiaries
Ensure that your heirs, including minor children, spouses, or charitable organizations, receive their intended inheritance without delays or disputes. Consider the example of John Smith, a widower with three adult children. One of his children is successful, while the other two have personal struggles. John customized his estate plan to provide different levels of protection for each child based on their unique circumstances – direct inheritance for his stable child, and protected trust funds with specific conditions for his children with personal challenges.
Reflects Current Wishes
Circumstances change, and so do personal preferences. Regular updates ensure your estate plan reflects your most current intentions.
How to Update Your Estate Plan
1. Consult an Estate Planning Attorney: Professional guidance ensures compliance with California laws.
2. Review Beneficiary Designations: Ensure your will, trust, and financial accounts align with your current wishes.
3. Update Power of Attorney & Health Care Directives: If you need to change your designated agents, updating these documents is crucial.
4. Revise Asset Distribution Plans: If you’ve acquired or sold significant assets, adjust your estate plan accordingly.
Plan Ahead
Without an estate plan in place, a deceased person’s assets will likely go to his or her legal spouse, then children, and then to unwanted blood relatives. Typically, if no living blood relatives can be found, the decedent’s assets go to the state. What can you do to avoid a situation like this? You can establish your own, tailor-made estate plan that addresses your unique needs, wishes and concerns.
No matter what happens, you should plan ahead and make sure you protect yourself, your loved ones, and your assets. Don’t wait until it is too late.
Contact an experienced estate planning attorney today to ensure your estate plan remains current and effective.