Unfortunately, creating an estate plan is not a one and done process. You must make sure that your plan keeps up to date with changes in your life. I recommend that my clients take a moment once a year to review their plans themselves and meet with me at least every three years to make sure that their plans are current. Here are five items that you should consider when reviewing your plans.
- Deaths, Disability, or Other Changes in the Family
You should consider whether the individuals named in your planning documents such as medical powers of attorney, durable powers of attorney, wills and/or revocable trusts, have died. While a well drafted plan will include provisions that provide for an alternate distribution of your assets or an alternate executor, for example, if people in your plan have passed, you should consider updating your documents to make sure they cover your life as it is now.
Other changes can trigger a need to change your plans. The person you named as executor may have moved across the country. Additionally, a person named as an agent, trustee, or executor may have become disabled physically or mentally. A child may have developed an issue with drugs or alcohol, and you need to remove the child as an alternate agent under your power of attorney or establish a trust for them to prevent them from squandering their share of the estate. All are good reasons to revisit your plan and make changes.
- Divorce and Remarriage
Most people make their spouse the agent under powers of attorney, make the spouse their executor, and give their spouse all or the bulk of their property at death. Texas law invalidates all of these upon divorce, which is what most people would want. However, you may be left without anyone to serve in these roles. Moreover, your new spouse will not be automatically substituted for your former spouse. If you want property to go to your new spouse or for the spouse to serve as your agent under a power of attorney, you must execute new documents to make this happen.
Now, it is pretty obvious that if you get divorced and remarried that you should update your planning documents, but what about when your children get divorced and remarried? In such an event, you should consider whether your plan needs to be updated to take into account your child’s changed circumstances.
- Changes in Your Assets
Your assets will change over time. If you have major changes in your assets, you should review your planning. If your Will leaves “my house at 123 Main Street” to one of your three children, and you later sell the house and purchase a replacement, your new house may pass under the residuary clause of your Will instead of going to the child to whom you want it to go. Additionally, you may have left a smaller portion of your estate to a loved one in your Will because of a certain bank account that was payable on death to that individual. If you have closed that account, you may want to change your Will to reflect this changed circumstance. Additionally, if your estate plan involves a revocable living trust, you should regularly consider whether all of the appropriate property has been transferred to the trust or is set up to be transferred to your trust at death.
You need to make sure you are on top of what you own and how that affects your plans. Most responsible financial planners will sit down with you on at least an annual basis to review your investments and make sure you are on track to achieve your goals. A great time to consider changes to your estate plan is when you are meeting with your financial planner. While you are there, check the beneficiary designations on your accounts.
- Life Insurance
You should consider your life insurance coverage. Do you have the right amount of life insurance? Too much? Too little? You should make sure you know exactly who is named as the beneficiary on the policy. I can’t tell you how many clients of mine have come back surprised by who was listed as beneficiary on their life insurance after I told them to check. You want to make sure it goes to the right person and you do not want it to go to your estate where it will potentially be exposed to your creditors.
- Changing Your Mind.
Finally, you may have simply changed your mind about to whom you want to give your things. You may have grown closer to the alternate agent on your power of attorney and would like her to handle your affairs when you need help. It is good to go over your plan and think about whether there are any things you just want to change.
A good estate plan will provide you peace of mind and help your loved ones when you pass away or become disabled. However, you must tend to your plan over the years to make sure it keeps up with your life changes and achieves your goals.