Estate planning is the process of developing a strategy for the care and management of your estate if you become incapacitated or upon your eventual death. One commonly known purpose of estate planning is to minimize unnecessary taxes and costs, including taxes imposed on gifts, estates, and probate court costs. However, your plan must also name someone who will make medical and financial decisions for you (without court involvement) if you cannot make decisions for yourself. Additionally, you need to consider how and in what form you will leave your property to loved ones and charities. To do so, a professional should always probe your family’s numerous circumstances and needs (every family is unique!).
Because your family’s dynamics are constantly changing, so too must your estate plan. Changes that necessiate a plan review include, but are not limited to: marriage, the birth or adoption of a new family member, divorce, the death of a loved one, a significant change in assets, or a move to a new state or country.
It is not uncommon for estate planning to be the last item on the list when a couple is about to be married – whether for the first time or not. Contrarily, marriage is an essential time to update an estate plan. You probably have already thought about updating emergency contacts and adding your spouse to existing health and insurance policies. There is another important reason to update an estate plan upon marriage – should you die, your assets and belongings may not automatically transfer to your spouse, especially if you have children from a prior relationship, a prenuptial agreement, or if your assets are jointly owned with someone else (such as a sibling, parent, or other family member). A comprehensive estate review can ensure you and your new spouse can rest easy.
Birth or Adoption of Children or Grandchildren
When a new baby arrives, it seems like everything changes, including your estate subtleties. For instance, depending on how it is drafted, your trust may not “automatically” include your newest family member. Furthermore, as the children (or grandchildren) grow in age, your estate plan should be revisited to confirm assets will be distributed in a way you deem proper based on the evolving knowledge you acquire about familial personalities and capabilities. What seems like a good idea when your son or grandchild is a four-year-old may, if unaddressed via an amendment, become a rather large inconvenience now that you know him/her as a 25 year old college gratduate, for example. Even worse, what if their personality and maturity level has failed to develop?
Most state and federal laws mandate an automatic removal of a former spouse from an inheritance and fiduciary positions after the couple splits. Still, you should immediately revisit all estate planning documents (and, potentially, all beneficiary designations) following a divorce to ensure you have (i) nominated a sufficient, sequential list of new decision makers and (ii) designated proper beneficiaries given this significant change.
Death of a Loved One
Sometimes an individual (or several individuals) who is named in your estate plan passes away. If your documents do not include thorough contingent provisions to adjust for the death, you must address your plan. For young parents in particular, a new will may be required when a previously-appointed guardian of your minor children dies. Be sure that any potential deaths among loved ones named in your plan are followed by “back up” provisions.
Significant Change in Asset levels and/or types:
While we all yearn for a sudden salary increase, feel blessed by an unexpected inheritance, or enjoy purchasing a new home or vacation property, these scenarios should prompt an estate plan adjustment. The bigger (or more asset-diverse) the estate, the more likely post-death issues will arise regarding the disposition of the assets. For this reason, it is best to see what changes, if any, are needed after a significant increase, decrease, or alteration of your assets.
A Move to a new State or Country
For most individuals, it is a good idea to obtain a new set of estate planning documents that clearly meet the new state’s legal requirements. Estate planning for Americans living abroad or for those who have assets located in numerous countries is even more complicated and requires professional assistance. Suffice it to say, it is critical to meet with a local attorney when settling into a new state or country so you may fully educate yourself on how to protect your family.