You’re one of the smart ones: You already have an estate plan that you and your spouse created it back in 1996; it’s sitting snugly in a safety deposit box, gathering dust until the (hopefully) far-off day when it will be needed. You’re done, right?
Kudos to you if you’ve already created your estate plan, you are one step ahead of the rest of the pack; but people and families grow and change, and your estate plan should change as your life does. Your estate plan should be reviewed regularly (we recommend the tax season as a good time to review your plan), but listed here are some life changes that will definitely require you to update your estate plan:
The birth or death of a beneficiary or fiduciary. This includes the addition of new children or grandchildren, or the loss of a parent or sibling.
Your own marriage or divorce, or the marriage or divorce of one of your beneficiaries. If you named your daughter’s husband in your plan five years ago when they were happily married, you’ll want to be sure to remove him after they go through that messy divorce.
Moving to a new state. Tax, health care, and estate planning laws vary from state to state, and your estate plan will have to change accordingly. This is especially true if you are moving from a non-community property state to a community property state.
A significant change in your financial status, or the status of your business, (if you have one). For the most part, your estate plan is designed based on the size of your assets. Different strategies are more effective for large estates than are for small; and if your financial status changes significantly, so should your estate planning strategy.
The simple passage of time. This may sound like the least important reason to update your estate plan, but it is actually the most common. Naming your parents as trustees when your children are minors is fine, but after fifteen years you may want to give your parents (who are now entering their 80s) a break and name your 37 year old son as trustee instead. In addition, there are some documents that should be re-executed from time to time to avoid them being construed as ‘stale”, e.g. your Advance Health Care Directive, your Nomination of Conservator, and your Nomination of Guardain for Minor Children?
Changes in the Tax Law: changes in the tax law can really require another look at your existing plans. For example, couples who prepared “Living Trusts” back in the 1990’s often used “A–B” trust splits on the first death in order to minimize estate tax. With the increasing exemptions, those trust splits may now no longer be necessary for most couples’ estates, and may actually be a hindrance. See our Article “Review Your Living Trust: Older Ones May Need Revision”.