Once you have an estate plan in place, you need to ensure that you keep it up to date and relevant to your current life, family, and changing plans. You should periodically review your will, trust, powers of attorney, and personal directives whenever a major event happens in your life.
1. Marriage or Divorce
When you marry or divorce, you need to update your powers of attorney, personal directives, executors, and trustees. It’s also time to update the beneficiaries for your will and trust, as well as the direct beneficiaries of your life insurance and retirement plans. You can also create or close joint accounts with a right of survivorship, allowing them to pass directly to the joint owner upon your death.
All too often we see clients fail to update their estate plan after a divorce, and it can lead to substantial issues. For example, in Tennessee, if your ex-spouse remains the primary beneficiary of your life insurance policy after a divorce, your ex-spouse will receive those funds. The only exception to this rule is when your marital dissolution agreement specifically addresses the fact that your ex-spouse will not inherit those life insurance policies.
2. Birth or Adoption of a Child
While many states such as Tennessee carve out part of your estate for a child not mentioned in your estate documents, why leave it up to statutory law? Upon the birth, death, or adoption of a child, you should update all of your documents.
You should also make plans for what will happen if you and your co-parent die or become incapacitated while your children are minors. A trust may be advisable, with trustees that you know are reliable and guardians for your children.
Upon the birth or death of a grandchild, it’s also a good idea to update your estate plans. If your grandchildren are direct beneficiaries of your will or a trust, you’ll likely want to ensure that you include your newly born grandchild as well. You may also want to update your plans if a child or grandchild has greater financial needs because of education or special needs.
3. Buying Major Assets
When you buy a home, investment property, or another major asset, or start a business, it’s time for an estate plan update. If you have a revocable living trust, you likely want to include that real estate in your trust to ensure it passes outside of probate. If you start a new business, you’ll need to make plans for what happens with your interest if you die or become incapacitated.
4. Tax Changes
Whenever Congress makes significant changes to the tax code, it’s time to revisit your estate plan. Changes to the estate or gift taxes can impact what you should include in a trust or how you pass assets to your heirs while you’re alive or after your death.
Similarly, whenever you move to a new state or country, it’s time to update your estate plan or at the very minimum review it with a qualified estate planning lawyer. Every state has unique laws that impact wills, trusts, inheritance laws, probate, and estate and gift taxes. If you move to a new country, it will be time for a major estate plan overhaul to conform to foreign laws.
5. Death or Illness of a Spouse
With the serious illness or death of a spouse, it’s also time to update your plans. If your spouse was your primary beneficiary or had power as a trustee or powers of attorney for your affairs, you’ll need to update everything. Even though it’s a difficult and emotional time, it’s vital to ensure that your family will be cared for, especially if you have minor children.
6. Receiving a Large Inheritance or Gift
Whenever you receive a large inheritance or gift, it’s time to update your estate plans, particularly if you are married. In Tennessee, inheritances or gifts are considered separate property rather than marital property. That means if you keep that inheritance in your name only it may not automatically pass to your spouse if you die.
On the flip side, maybe you want to protect your inheritance from your spouse. If so, creating an asset protection trust may be a good idea. Either way, it’s a good idea to address inheritances and gifts in your estate plan specifically.
7. You Retire
When you’re ready to retire, it’s important to address your estate plan, powers of attorney, and advanced directives to ensure you’ve made arrangements if you become incapacitated. Your plan should ensure that you can maintain the standard of living you’d like and address future healthcare and long-term care arrangements.
Even if you don’t have a significant event happening in your life, it’s a good idea to review your estate plan at least every four to five years. So, make it a point to review your plans every time you vote in an election.
Bottom Line
If you need to create or review your estate plan, we can help. Give us a call, and we can assist you in developing or modifying an estate plan that fits your lifestyle and your family’s long-term goals.