A common misconception with estate plans is that it is a one-and-done process. In other words, once the plan is complete, there is no real need to revisit it later. This could not be further from the truth. Since the legal arrangements in place are governing at the onset of death, disablement, or incapacitation, you should regularly review your estate plan to make sure it meets your present circumstances and wishes.
There are numerous events that should prompt a review of your estate plan. Even if you have a sound estate plan in place, you should consider reviewing and updating your estate plan after:
1. Financial Changes
When a change to your financial circumstances occurs, it can play a factor in the effectiveness of your current estate plan. A suitable estate plan when your income and/or net worth were significantly higher or lower may not fit your current circumstances.
Moving to a new state can impact your estate plan, as different states have different laws and ramifications for an estate plan. When your residence changes from one state to another, you should speak to your estate plan advisor about reviewing and possibly updating your plan.
3. Changes in Family
Major life changes with any individual included in your estate plan may call for plan modifications. Significant family events such as marriage, separation, divorce, birth, adoption, illness/incapacity, or death of your children or grandchildren should trigger a call to your estate plan advisor to discuss the effects and possible adjustments to your current plan.
4. Special Circumstances
Sometimes a child has special needs due to physical or mental limitations. Sometimes a surviving spouse’s ability to earn a living changes due to a disability. Such situations create special needs that often require additional special planning.
5. Tax Law Changes
Anytime the law for the federal estate tax and federal or state taxes, modifications to your estate plan may be necessary. What was an appropriate structure under a previous tax law may no longer fit your estate plan.
Most recently the Federal Estate Tax exemption amount (a/k/a Unified Credit) for decedents dying in 2021 increased to $11,700,000. Additionally:
- The Federal Gift Tax exemption remains at $11,700,000.
- The Federal Generation-Skipping Transfer Tax exemption equals the Estate Tax exemption.
6. Unique Circumstances Changing Tax Laws
The COVID-19 pandemic has impacted several areas of state and federal tax laws. When it comes to Estate Tax law, the only thing we can say with relative certainty is that changes to the US Federal tax code are coming.
7. Two-Year Estate Planning Review Meeting
Variables such as starting or growing a business, purchasing life insurance, and increases in real estate values and stock market prices, can make a simple estate qualify for tax planning. Many estate planning professionals suggest that individuals meet with their estate planning advisor at least every two years to conduct a review meeting to ensure that their current estate plan appropriately meets their current circumstances and ongoing finances and family.
8. Five-Year Advance Directives Update
Out-of-date Advance Directives can cause problems when trying to be used for some purpose, such as a financial institution allowing an attorney-in-fact to act under an older Durable Power of Attorney for Financial Matters. To avoid possible issues with “stale” Advance Directives documents, it is recommended that clients update their Advance Directives (including Durable Power of Attorney for Financial Matters, Durable Power of Attorney for Health Care, and Living Will) at least every five years.
9. Major modification to the needs, circumstances, goals, or objectives of yourself or your beneficiaries.
There are a lot of changes to family dynamics, business continuity, and needs that can cause a necessity to review and update and pivot your estate planning needs and structure.
If you have questions regarding the effectiveness of your current estate plan or would like to make updates to the plan, it is recommended to speak to an experienced estate planning professional, such as an attorney or financial advisor, for assistance.
This article has been prepared for general information purposes and (1) does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney. Always seek professional counsel prior to taking action.