Most people feel their estate plan is done when they sign a will, trust, power of attorney, and living will. But estate planning is a lifelong process. As your life changes, you'll want to revisit your documents and make sure they still meet your needs and reflect your wishes.
It's important to keep up to date with your estate plan because an out-of-date one can be ineffective, unintentionally leave people out, create financial troubles, and cause turmoil among family members. In general, you should update your estate plan if you have major life changes, laws change, or your plan doesn't reflect what you want now.
Here are six questions to ask as you go through an estate plan checkup.
Has your family or household changed?
If your family situation has changed since you prepared your estate plan, you're ripe for an update. Key family changes that can affect an estate plan include:
- Marriage. In some states, marriage invalidates a will written before the marriage, while in others the old will stands—even if your new spouse is omitted.
- Having children. You may want to include children, stepchildren, and grandchildren in your will. You may also want to name guardians for your children and establish a trust to manage their inheritance until they reach a certain age.
- Divorce. If you're like most people, your will leaves everything to your spouse, and your spouse is also the beneficiary on insurance policies and financial accounts. While this is usually revoked by state law once you're divorced, you shouldn't leave it to chance—get a new estate plan and change your beneficiary designations.
If you're changing your will because of marriage or divorce, be sure to review and update your healthcare designations and general powers of attorney.
Who is named in your estate planning documents?
Your current estate plan may assign important roles like power of attorney and executor to people who are now deceased or unable to carry out those duties. Make sure the people you've named are still willing and able to serve.
Also, review the beneficiary designations for your life insurance policies, pensions, and retirement accounts, and update them if necessary.
Have you moved to a new state?
If you've moved to a new state since you prepared your estate plan, your will, powers of attorney, trust, and living will are probably still valid in your new state. But you still have valid reasons to update your estate plan.
Your new state may have different laws about probate and estate taxes that you'll want to take into account. Financial institutions and healthcare providers may more readily accept an in-state power of attorney than an unfamiliar out-of-state one. And the people you named as executor and power of attorney may have a hard time filling those roles if they now live far away.
Have your assets changed?
If you have more money and property now than you used to, it may be time to make some estate plan changes. As your wealth grows, you may benefit from setting up a trust. A trust can help manage estate taxes, avoid probate, provide for children, and plan for long-term care.
Have you started a business?
If you don't have a plan for the future of your small business, you could leave your heirs and business partners in a chaotic situation. Succession planning for small business owners often includes a buy-sell agreement with partners, life insurance, and/or plans for children or other family members to take over the business.
A lawyer can advise you on setting up a succession plan.
Is your estate plan more than five years old?
A good rule of thumb is to review your estate plan with an estate planning lawyer every five years—even if you don't think you need an update. Tax and estate planning law changes can affect an estate plan.
Also, your estate planning goals and needs evolve as you get older. For example, planning for long-term care may not be on your mind when you're in your 30s, but it may be a major goal in your 60s.
Other reasons to make estate plan changes include wanting to provide for someone not named in your current estate plan or changing your mind about serving in various roles. How often you update your estate plan depends on your situation, but an annual review ensures that your plan is always up to date.
