You got your estate plans squared away and now you never have to look at them again, right? Not exactly. To ensure they continue to be relevant and current, you’re going to have to update them every so often.
For example, if you meet a long-term financial goal like paying off a debt or buying a home after you finish your estate plans, they won’t account for the change in your assets. This means there won’t be a designated beneficiary, which can cause stress, confusion, and a lot of extra legal legwork for your loved ones when you die.
To prevent this from happening, review and update your estate plans every so often to ensure they reflect your current assets, beneficiaries, and wishes.
When You Should Update Your Estate Plan
It’s not like you have to update your estate plans every month. They really only need to be updated when your assets, beneficiaries, or estate administrators change. Here’s when you should update your estate plans:
After a Major Life Change
Major life events have a huge impact on your estate plans. While estate planning may not be top of mind in the following situations, you should review your estate planning documents after:
1. You Get Married
Update your estate plans after marriage to reflect your new spouse and any stepchildren you have. This is especially important if you’ve been married before and need your estate plans to include your new partner instead of your ex.
2. You Get Divorced
For the same reason, you need to update your estate plans after a divorce or separation. Chances are you’ll want to update what, if anything, you would like to leave your ex-spouse. You may also want to remove them from your power of attorney and living will.
3. The Birth or Adoption of a Child or Grandchild
If you don’t update your estate plans after the birth of a new child, they won’t be included in your will. That means they won’t be entitled to any specific gifts or assets that are distributed after you pass away. You’ll likewise want to update your estate plans after the adoption of a new child or grandchild.
4. Your Children or Grandchildren Reach Milestones
As your children and grandchildren age, the assets you want to leave to them, or how they access them, may change. For example, your wishes for your beneficiaries may change as they reach the age of majority, get married, or have a child.
Consider that many trust funds are set up to become available once any minor children reach a certain age, like 21.
You may also decide to change how your assets are distributed depending on the stage of life your beneficiaries are in, like if one of your children owns their own home and another does not.
5. Someone Relevant to your Estate Plans Becomes Seriously Ill or Disabled or Dies
You should review your documents if any person relevant to your estate plan — such as a beneficiary, executor, guardian, child, spouse, or another family member — becomes seriously ill or disabled. This can impact which assets you might want them to receive and how, and whether they can legally act on your behalf.
The same applies if anyone who is part of your estate plan passes away before you do. This is especially important if the deceased is named as an attorney-in-fact, health care agent, or executor.
6. You Move to a Different State or Country
Inheritance laws and estate taxes vary by state and country. If you move somewhere new, it’s important to update your estate plans to ensure they reflect your new state or country’s laws and regulations.
If you aren’t sure whether your estate planning documents adhere to your new location’s laws, reach out to a local estate planning attorney or law firm. They’ll be able to help you make any necessary revisions to ensure your estate plans are legally sound.
7. Your Relationship With a Beneficiary Changes
While you shouldn’t change your will every time you get into a disagreement with a beneficiary, you should update your estate plans if your relationship with someone changes permanently. For example, if you and a beneficiary become estranged, you may want to disinherit them.
If you do decide to disinherit someone, don’t make the decision lightly. Disinheritance can cause hurt feelings, confusion, and drawn-out legal disputes, so make sure you’re certain you want to move forward before changing your estate plans.
After a Significant Financial Change
Many of the estate planning documents you will use are directly related to the distribution and management of your assets. That means you need to revise your estate plans any time you experience a significant change in your personal finances.
Update your estate plans after any of the following events.
1. Your Assets Change
When your assets change, it has a direct impact on the value of your estate and how much is available to be distributed to your beneficiaries.
If your assets increase or decrease by a significant, permanent amount, it should be reflected in your estate plans. This could include accruing debt, inheriting money, winning the lottery, getting a life insurance policy, or gaining or losing substantial money on an investment.
2. You Purchase or Sell Real Estate
If you make any changes to the property that you own, it needs to be accounted for in your estate plans. For example, revise your estate planning documents after you buy or sell:
- A family home
- A vacation property
- An investment property
- Commercial real estate
- Undeveloped land
3. You Open, Close, Sell, or Invest in a Business
Any business-related endeavors you take on or conclude affect everything from your power of attorney to your will and living trust. If you make any changes to your business interests, update your estate plans to incorporate the increase or reduction in your assets.
4. Your Professional Life Changes
Your job helps you to grow your assets over time. It only makes sense for you to update your estate plans if you:
- Get a new job or lose an old one
- Receive a significant raise
- Change careers
- Become an entrepreneur or freelancer
- Get a major promotion
5. Your Financial Goals Change
Financial goals include everything from starting a retirement account to paying down credit card debt. For most people, these goals change over time as they accrue assets and move through life.
For example, maybe your initial retirement plan was to pay off your home, but after some good financial decisions, you’re now able to aim for something bigger, like retiring in a different country or state.
As your financial goals change, make sure your estate plans continue to reflect your current situation, not a past one.
After a Change in Federal or State Tax Laws
State and federal estate tax laws change every so often, and so do inheritance laws. Even if you haven’t experienced any major life events or changes in assets, it’s a good idea to review your estate plans every so often to ensure they still conform to the latest estate tax laws.
This will help your loved ones to avoid issues with the IRS when it comes to paying any owed estate taxes and distributing your wealth.
As with moving to another country or state, if you don’t feel certain your estate plans reflect current estate tax law, consult a local estate planning attorney. They can also assist you with tax planning related to your estate, which can help you to reduce the amount your estate will owe.
Every 3 to 5 Years
If you don’t fall under any of the above circumstances, it’s still good practice to go over your estate plans every three to five years. Not only may your assets change, but also your personal opinions, beliefs, and relationships.
For example, consider whether:
- You’ve discovered a new charitable cause you’re passionate about
- Your spiritual beliefs have changed
- Your relationship has changed with an executor or attorney-in-fact
- You have any new pets that need to be cared for
Your estate plans can change for many different reasons, which is why it’s so important to review them on a regular basis. That’s especially true if you have strong opinions about your end-of-life plans and want to have control over your estate after you die.
Why You Should Update Your Estate Plan
Updating your estate plans comes with a variety of benefits to you, your loved ones, and those who will be responsible for closing your estate. Keeping your estate plans relevant and reflective of your current financial situation comes with many advantages.
These are the main reasons you should update your estate plans:
For Peace of Mind
If you have specific wishes about any of your assets, updating your estate plans ensures that they’re followed. For example, if you want to leave a family heirloom to a grandchild or donate to a charity, you can spell out this wish for your heirs.
Making a clear plan helps to give you a sense of control over your wealth and belongings, and ensures that they’re distributed based on your preferences instead of someone else’s.
To Make It Easier to Settle Your Estate
When you die without a will, your estate has to pass through probate, which can take months and sometimes even years. That means your beneficiaries won’t have access to your assets until they’ve moved through the process.
And while a will doesn’t necessarily mean you can avoid probate altogether, it does make the process much easier and straightforward for the courts. A clear, legal estate plan is much more likely to move through probate quickly and without issue.
That means your assets can be distributed and your estate closed faster and your loved ones can avoid having to make decisions about who gets what.
To Ensure Beneficiary Designations Are Relevant
Over time, your relationships with people change. As you move through life, your beneficiaries and your wishes for how to distribute your assets to them may change.
For example, a new child or grandchild may come into your life, or you may decide to leave a portion of your estate to a charity that has become important to you. Updating your estate planning documents ensures no person or cause important to you is left out.
To Ensure Executors, Trustees, Agents Are Relevant
The same goes for anyone acting on your behalf, such as executors, trustees, and agents. Updating your estate plans ensures you are leaving the management of your affairs to those whom you trust.
How to Update Your Estate Plans
For small changes, like adding a beneficiary or changing an executor, you can use a codicil to update your will. A codicil is a legal document that acts as a supplement to your last will and testament.
However, for major changes, or if you’re making multiple updates, it’s best to make a new will altogether. If you do, remember to redistribute your updated will to your executor and replace any existing copies with your new documents.
As you move through life, you will experience all kinds of changes in your assets, relationships, and personal preferences. If you don’t update your estate plans to reflect them, there will be no way for your loved ones to determine how to distribute your estate.
To ensure your updated estate plans are followed, replace any existing documents, inform relevant parties, and stick to any relevant laws in your state.