Posted by: The Life and Legacy Planning Group
Estate planning is the process of developing a strategy for the care and management of your estate if you become incapacitated and upon your death. One commonly known purpose of estate planning is to minimize taxes and costs, including probate court costs, gift taxes, estate taxes, and generation skipping transfer taxes. However, your plan must also name someone who will make medical and financial decisions for you if you cannot make decisions for yourself. You also need to consider how to leave your property and assets while considering your family’s circumstances and needs.
Since your family’s needs and circumstances are constantly changing, so too must your estate plan. Your plan must be updated when certain life changes occur. These include, but are not limited to: the marriage of a member of your family, the birth or adoption of a new family member, a divorce, the death of a loved one, a significant change in financial circumstances, a move to a new state or country, and many others.
Marriage: 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. Marriage is actually 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: in the event of death, your money and assets may not automatically go to your spouse, especially if you have children from a prior marriage, a prenuptial agreement, or if your assets are jointly owned with someone else (like a sibling, parent, or other family member). Beneficiary designations for life insurance policies, annuities and retirement accounts also require a careful review upon marriage. 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 – and so should your estate plan. For example, your Will or Living Trust may not “automatically” include your new child, depending on how it is written. So, it is always a good idea to check and add the new child as a beneficiary. As the children (or grandchildren) grow in age, your estate plan should adjust to ensure assets are distributed in a way that you deem proper and appropriate. What seemed like a good idea when your son or granddaughter was a four-year-old may no longer look like a good idea once their personality has developed and you know them as a 25-year-old college graduate, for example.
Divorce: Some state and federal laws may remove a former spouse from an inheritance after the couple splits, however, this is not always the case, and it certainly should not be relied on as the foundation of your plan. After a divorce, you should immediately update beneficiary designations for all insurance policies and retirement accounts, and you should change the agents named in Powers of Attorney and HIPAA Authorizations. It is also a good time to revamp your Will and Living Trust to make sure they accomplish what you want.
The death of a loved one: Sometimes those who are named in your estate plan pass away. If an appointed guardian of your children dies, it is imperative to designate a new person. Likewise, if your chosen Executor, Trustee, or Agent named in your Power of Attorney for Health Care or Power of Attorney for Property dies, a new one should be named right away.
Significant change in assets: Whether it is a sudden salary increase, inheritance, or the purchase of a large asset, these scenarios should prompt an adjustment an existing estate plan. The bigger the estate, the more likely there will be issues over the disposition of the assets after you are gone. For this reason, it is best to see what changes, if any, are needed after a significant increase (or decrease) in 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 those who have assets located in numerous countries is even more complicated and requires professional assistance. It is always a good idea to learn what you need to do to completely protect yourself and your family when you move to a new state or country.
We are here to help you get fully settled in and build a plan to protect you and your family.