Top Reasons People Update Estate Plan

10/13/2011

Here's a list of the top reasons why you should consider updating your estate plan.
 
Change in Marital Status

A chnage in your marital status can require significant changes to your estate plan. If you've recently married, then a whole new set of gift and estate tax planning opportunities have become available to you and your new spouse, including tenancy by the entirety, credit shelter/marital trusts and gift splitting to name just a few. If you are recently divorced, then your estate plan should be updated to insure that your former spouse is removed as a beneficiary and fiduciary and you'll also need to update the beneficiary designations for your life insurance and retirement plans, including IRAs and 401(k)s, to insure that your spouse is removed there as well.

Change in Financial Status

A change in your financial status can require significant changes to your estate plan. If you've recently won the lottery or received an inheritance, then you'll need to reevaluate if your estate is taxable and, if it is, then explore techniques that will minimize these taxes. You should also fund your winnings or inheritance into your Revocable Living Trust so that these assets won't need to be probated. Aside from this, you should segregate your winnings or inheritance from your marital assets if you don't want them snatched up in a divorce. On the other hand, if your estate has declined in value, then you should review your plan to insure that it still makes sense in view of your lower net worth.

Birth or Death of Beneficiary or Fiduciary

If a beneficiary or fiduciary named in your estate plan has died, then you should consider updating your plan to remove the deceased person's name.  If your spouse has died, then your plan may need to take on a whole new structure. On the other hand, if you or a beneficiary has adopted or had a child, then you should review your plan to insure that the new child is, or perhaps isn't, included.

Purchase or Sale of a Business

If you have recently bought a business, then you should meet with your estate planning attorney to insure that your estate plan is structured properly to deal with the business if you become disabled or after you die, and also to put together a comprehensive business exit plan. On the other hand, if you've recently sold a business, then you should meet with your estate planning attorney to insure that your plan is properly structured now that you don't own a business, that the sale proceeds are titled in the name of your Revocable Trust, and to determine if your estate is no longer, or has become, taxable. If it has become taxable, then you'll need to figure out how the taxes will be paid as well as ways to minimize the estate tax bill.

Moving to New State

Moving to a new state is one of the most important reasons to update your estate plan.  This is because state laws dictate what estate planning documents need to include and how they need to be signed.

Changes in Lives of Beneficiaries or Fiduciaries

While significant changes in your own life will require changes in your estate plan, so will changes in the lives of your beneficiaries or fiduciaries. If your children were minors when you initially set up your plan, then as they get older you should assess whether they're ready to be named as your fiduciaries. If a beneficiary or fiduciary moves away or you simply lose touch with them, then you should reevaluate your plan to insure that your property is still going where you want it to go and that you've named the right fiduciaries (including guardians for minor children). Suffice it to say that you should monitor the changes in the lives of your beneficiaries and fiduciaries to determine if these changes will have any affect on the goals and structure of your estate plan.