Change with the Times

Once you have an effective estate plan, it is important to realize that this may only be efficient for a short period of time. An estate plan is a dynamic financial tool and evolves constantly, for many reasons.

To maintain an effective estate plan you must be aware of any and all changes that affect your estate and make any updates or changes to your plan to account for them. However, no changes can be made in an irrevocable trust.

You should review your estate planning documents and gifting strategies regularly and go over them with your attorney and/or tax professional to make sure everything is still appropriate to your goals. 

The changes to your estate that will require immediate attention will generally fall into three categories:

  1. Changes in estate planning and tax laws;
  2. Additions to or losses from your estate; and
  3. Changes in the people involved in your estate, such as by birth, death, marriage, or divorce.

People change

In addition to unexpected deaths and disability, as you, your children, and other beneficiaries age or change over time it may have an effect on your estate plan.

Here are a few things to consider.

  • Major changes or updates may be required in your estate plan when a child becomes an adult; they no longer need a guardian or conservator and could become a trustee and/or have power of attorney.
  • You will have to update your will or trust if you want a different distribution of income to your children if one becomes more successful.
  • You may no longer trust or have confidence in your chosen trustee, executor, or children’s guardian.
  • If you change your mind on other issues related to your beneficiaries, your estate plan will need to be updated.

Circumstances changes

There will likely be other major life events such as birth, marriage, and divorce that could result in a major change or update of the beneficiaries and distribution of your estate. Some of these events may include change in relationships.

  • Make sure all changes are made equally across all of your assets.
  • Any discrepancies will complicate things and may require legal involvement if one type of plan does not clearly overrule another. For example, the beneficiary of a payable on death account will get the settlement regardless of what you stated in your will or trust.

If handled well, your assets will increase in value over time as they grow and are added to. They may decrease.

  • Changes in the value of assets and any other changes in your finances may affect your estate plan if they result in a different circumstance than when it was created.
  • For example, your net worth may become more than your state’s estate tax limit, prompting you to begin giving yearly gifts to family, making charitable gifts or forming a charitable trust to get your taxable estate below the limit. Charitable gifts can also be deducted from your income taxes.

A job change can result in the need for an update. For example, they may have a better retirement plan than your existing one which may require a transfer into your new employer’s plan.

Laws change

State laws are highly variable and you have to be aware of them.

  • In most cases when all states have a law or regulation, there are differences among them such as dollar amounts or who the law applies to.
  • There are many types of estate planning tools that are only available in certain states, such as tenancy by the entirety and common property. 

It is crucial to research all applicable laws when you create your estate plan, move to a different state, or acquire assets in or move assets to a state you are not currently living in. 

Federal and state estate planning laws and the tax code are constantly changing.

  • Changes in laws often have some effect on your estate, but do not always result in having to adjust your estate plan accordingly.
  • Your estate planning professional should be able to keep up with any changes and advise you accordingly. It may be beneficial to stay personally informed as well. 

Change may be subtle

Even if you don’t think there are any changes, you should review and consider revisiting your estate plan every 3 to 5 years.

No job is complete until the paperwork is done

Like anything to do with estate planning, you have to provide the correct documentation for any changes. You may need to have some of them witnessed or notarized before they are valid.

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