Having an estate plan is a critical component of responsible financial management. It helps ensure your assets are distributed according to your wishes and protects your loved ones when you're no longer able to do so.
However, it's essential to recognize that estate planning is not a one-and-done process. Life is constantly evolving, and as such, your estate plan should adapt to reflect these changes.
If you're thinking about whether or not it's time to update your estate plan, take a moment and remember that you're already ahead of most because you have one.
Generally, estate planning attorneys recommend reviewing your estate plan every few years and certainly after any major life changes. This review should include not only your will but also other relevant documents that are part of your comprehensive estate plan.
A comprehensive estate plan may consist of a:
Some other items that may also be included are life insurance, retirement plans, and business plans if you own a business.
As you can see, this can be a significant process, especially if you've waited a long time to make any needed updates. Fortunately, if you make updates as things change, you may have an easier time and the process may not take as long to complete.
As you approach reviewing your estate plan, you're looking to ensure that your intentions have not changed, the right people are included, any significant life changes are reflected, and major changes are notated. Make sure you give this process some serious thought on your part.
Some common reasons to change your comprehensive estate planning documents may include any of the following:
Changes to family dynamics can happen at any time. When a change does happen, you should ensure your estate plan reflects those changes.
Entering into marriage or going through a divorce can significantly impact your estate plan. In the case of marriage, you may want to include your spouse as a primary beneficiary and update your will to reflect this change.
Conversely, during a divorce, you might want to revise your beneficiary designations and remove your former spouse from your estate plan if you do not want your assets to go to your ex-spouse.
You do not have to be legally married to trigger a review and revision to your plan. In fact, if you want to care for your partner and you are not married, now is an excellent time to ensure this occurs.
If you are not legally married, your partner may not receive anything under the law in the state you live if it was not explicitly laid out in your estate plan. This can apply to domestic partnerships as well as common law marriage.
Welcoming a new child into your family brings immense joy and newfound responsibilities. It's a great time to ensure your estate will benefit and support the next generation.
In addition, it's crucial to update your estate plan to appoint guardianship for your minor children and establish trusts or other mechanisms to protect their future financial well-being.
Make sure you include all children, biological, adoptive, and/or stepchildren, if appropriate. Stepchildren are not usually included as beneficiaries if you die without a will or if your will fails to name them.
Significant changes in your financial situation, like receiving a substantial inheritance, starting a successful business, or experiencing financial hardships, should prompt a review of your estate plan.
Adjusting the distribution of assets, revising charitable bequests, or implementing strategies to mitigate tax implications may be necessary for such circumstances.
Moving to a new state or acquiring additional properties can have legal and tax implications. Each state has its own laws regarding estate planning, so updating your plan to align with the laws of your new jurisdiction is crucial.
Additionally, if you acquire valuable assets, such as real estate or valuable collections, ensuring their inclusion in your estate plan is essential.
Serious illness, disability, or the diagnosis of a chronic condition can significantly impact your estate plan. Updating your plan allows you to establish healthcare directives, designate healthcare proxies, and make arrangements for long-term care, ensuring that your medical decisions align with your wishes.
Health changes don't just specify you or your spouse. If a named guardian, your executor, or any beneficiaries predecease you or have new health diagnoses, it's crucial to revise your documents.
Beyond marriage and divorce, other relationship changes may necessitate estate plan updates. This includes the death of a spouse, the estrangement of family members, or the formation of new meaningful relationships.
Reviewing and updating beneficiary designations, power of attorney, and healthcare proxies become essential to reflect your current circumstances.
Occasionally, things in your life may not have changed much for several years. Regardless of significant updates or not, if you haven't taken the opportunity to review your estate plan in some time, this is reason enough to look at it and ensure there is nothing that needs to be updated.
Keep in mind that it's considered a best practice to review your plan with your estate planning attorney on a regular basis.
Also, don't forget to review your account beneficiaries for retirement accounts or life insurance policies. These are separate from your will and estate documents.
Estate planning can be a long-drawn-out process and cumbersome to overcome. Despite this, it plays an integral role in the foundation of a sound financial plan.
If you have an estate plan already in place, then you've started off on the right path. If you do not have one yet, it's time to get one drawn up so you can have a plan in place. However, once you have finalized your estate plan, it's not something you can forget about.
Your estate plan is not a static document but rather a dynamic reflection of your life and intentions. Regularly updating your estate plan ensures it remains relevant and aligned with your evolving needs and desires. Whether it's the joyous occasions of marriage and childbirth or the challenges of divorce or health issues, life changes necessitate revisiting your estate plan.
By staying proactive and seeking professional guidance when needed, you can ensure that your legacy is protected and your loved ones are cared for according to your wishes.
Contact one of our financial planners if you're unsure how to start estate planning or need help knowing when it is time to make updates.
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This article was written in collaboration with the financial professionals at Spaugh Dameron Tenny. Our team features CERTIFIED FINANCIAL PLANNER® professionals, Certified Exit Planning Advisors, insurance specialists, investment coordinators, and experienced analysts – all dedicated to addressing the unique financial needs of physicians, dentists, executives, and retirees. With decades of collective experience, we provide clear and comprehensive guidance in all areas of financial planning, wealth management, retirement planning, investment strategies, and practice transitions.
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