There's a common misconception that only the elderly or someone close to the end of their life should have an estate plan. In reality, estate planning is crucial at every stage in your life.
Why Flexible Estate Planning Is Important
Writing your living wills and trusts with an attorney and filing them away, never to be looked at again, is not a good idea. Instead, you need to be flexible with these documents, because there are certain times in your life that circumstances are going to change. These changes will need to be reflected in all aspects of your estate planning process.
"Life and finances change over time, as does the legislative landscape, as evidenced by the recent changes to the federal estate tax exemption," says Brent Weiss, CFP, co-founder and chief evangelist of Facet Wealth. "Plans need to be flexible to account for our ever-evolving lives and for external factors that are outside of our control."
If you don't review your estate planning checklist to update documents as things change, you could leave your family and beneficiaries scrambling after you're gone.
"The most common thing I see in my practice is that people have named executors for their wills that have since passed away, leaving a vacuum in terms of who will be responsible for wrapping the affairs of the deceased individual," says trust and estate attorney Russ Nesevich, managing partner and founder of Nesevich Law, LLC. "This could then lead to infighting among family members over who will serve in that role, creating all sorts of potential problems and issues, and causing unnecessary delays."
What Goes Into an Estate Plan
Estate planning may include one or several documents like living wills and trusts. According to Weiss, most American families need three basic documents when it comes to estate planning: a last will or trust, a general power of attorney (often called a POA), and 3) an advanced healthcare directive.
"It is also important to note that an estate plan goes beyond these basic legal documents. An estate plan includes asset titling, beneficiary elections, and, in some cases, trust planning, which are all part of an overall financial planning strategy."
When to Update Your Estate Plan
According to Jason R. Savarese, Esq. of Savarese & Associates, PLLC, you should try to review your estate plan at least once a year or when a major life change occurs. These changes may include the birth of a child or grandchild, a death, a divorce, or a marriage, as well as major changes in your financial situation, such as receiving an inheritance.
Weiss says that there are two other instances where you may need to change your estate plan: when you move to a new state—since you need to execute your new documents according to that state's laws—and when state or federal laws change.
Of course, it's crucial to take charge of any estate planning changes as soon as possible. You never know when you're going to pass, and leaving guidance for your family and beneficiaries is necessary.
"You must act while you are competent to do so," says Savarese. "If you suffer degenerative diseases that affect your mental abilities, you may no longer be able to execute estate planning documents. It is important to make your plans while you are able, as none of us are promised tomorrow."
By keeping all estate planning documents up to date—as life and family situations change—you're providing a valuable service to your family both now and in the future.