5 Reasons You Should Update Your Estate Plan, According To Experts
Written by
Jennifer Taylor
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Levi Leidy
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Making an estate plan isn’t fun. If you’re like most people, deciding how your assets will be appropriated upon your death and who will make important decisions on your behalf if you’re unable to do so on your own isn’t a particularly pleasant experience. However, making an estate plan is necessary. It’s also essential to periodically dust it off to ensure the directives accurately state your wishes.
Creating an Estate Plan
If you’re not thrilled about regularly reviewing your estate plan, you’re not alone.
“Estate planning is not the most exciting part of financial planning, so it is often neglected by individuals and their advisors,” said Robert J. Allan, CFA, CFP, CPA, managing director at Welon Partners. “But like any part of the plan, it should be updated regularly.”
He said his firm has what they call the “Core Four” estate planning documents that all clients are encouraged to have. This includes a last will and testament, power(s) of attorney, advanced care directive and a healthcare proxy.
“The will explains how the estate is to be settled,” he said. “In other words, how all of your ‘stuff’ is divided up amongst your heirs.”
He said a power(s) of attorney allows you to name someone to act in your place if you are unable to do so. While it’s ultimately up to you to periodically review these documents and update them as needed, he said working with the right team is important.
“A good advisor should be monitoring your personal situation and may recommend times where they see external factors that necessitate a review or modification to your documents,” he said.
Who Needs an Estate Plan?
Most people start estate planning after getting married, having children or a death in the family, but you can begin this process anytime after turning 18 years old, according to Legal Zoom.
One of the first places to start is deciding if you need a last will or a living trust. Creating a last will might be easier, but they often need to go through the probate court after the owner’s death. Alternatively, a living trust may take longer to set up and require additional paperwork, but will likely avoid probate.
You can purchase a basic online estate planning package for less than $200, according to the National Council on Aging. Comparatively, the cost to hire an estate planning attorney can be several hundred dollars per hour.
The option you take will vary according to several factors, including the complexity of your estate plan — i.e., whether or not you have dependents or aren’t sure how to divide your estate — and budget. Many online services also offer packages that allow you to work directly with an attorney, which could be both a thorough and affordable option.
Taking this step can be intimidating, as it may feel morbid to create directives surrounding your death. However, this is important because doing so will make life easier for your loved ones while ensuring your last wishes are known. It’s also worth pointing out that there’s no right or wrong way to go about it as long as the documents involved cover all your bases.
When Should You Consider Reviewing Your Existing Estate Plan?
We will look at when you should review your estate plan and the reasons, according to financial experts.
Conduct an Annual Review
“I recommend reviewing your estate plan at least once a year,” said Eric Jochimsen, CFP, founder and financial planner at JBY Financial Planning. “This ensures it stays up to date with your current life situation.”
While you may not always have the time to update your estate plan, it’s crucial that you do an annual check-in to ensure that everything is accurate and that your current situation is reflected. Since life can move fast at times and people will leave your life, you want to conduct a simple review to keep your plan relevant.
After Major Life Changes
“You should review your estate plan every five to 10 years as well as when you’re experiencing certain life events like marriage, divorce, birth or adoption of a child or becoming widowed,” said Carla Adams, a financial advisor and founder of Ametrine Wealth. “Who you want your assets to go to, as well as who you want as your financial power of attorney and healthcare proxy can change, as well as who you want to be the executor of your estate or guardians of your children.”
Adams also pointed out that while most estate attorneys will include language in clients’ wills and trusts to account for future children, accidentally disinheriting a child could be a devastating oversight.
“I feel it’s important to confirm your beneficiaries are still accurate and that the people you’ve designated as personal representatives, powers of attorney and trustees are still capable of fulfilling their roles,” remarked Jochimsen. “This is especially important considering they may be grieving during a difficult time.”
While a major life change can be stressful, you should do your best to review your estate plan to confirm that the modifications are reflected.
Adams added, “This is why it is equally important to regularly review your beneficiary designations on your retirement accounts and insurance policies. Updating your will does not and cannot impact who inherits these types of assets, which is always dictated by the account or policy beneficiary, even when challenged in court. In fact, ex-spouses have been known to inherit retirement accounts that they probably weren’t meant to inherit because the deceased never updated their account beneficiaries post-divorce.”
After the Death of a Spouse
Raul Gastesi, an attorney, partner and co-founder at Gastesi Lopez & Mestre, stated that a critical time to review your estate plan is after the death of your spouse. He said, “Many documents and details of an estate plan need updating immediately after this occurs.”
You want to take the time to update your beneficiary, power of attorney, insurance policies, trusts, senior care portions and then eventually decide on who will now inherit your estate. You want to ensure that you face these uncomfortable decisions as soon as possible.
When There’s a Change in Your Family Dynamic
“If there have been any changes in your life, such as who you trust and/or who you love, you may want to consider reviewing your estate plan,” noted Chris Urban, CFP, RICP and founder of Discovery Wealth Planning.
Even though a shift in your family dynamic may not seem like a big deal at the time compared to divorces or deaths, you still want your estate to have the correct information that accurately reflects your current situation.
When Your Assets Have Changed Substantially
Urban pointed out that if there have been any substantial changes in the value of your assets (homes, retirement accounts, investments, art, collectibles, etc.) that may end up with one or more of those people you love and/or trust, you may want to review your plan.
Gastesi concluded, “As with any estate planning documents and discussions, it’s imperative that you have well-written agreements rather than solely relying on verbal agreements. If it’s not in writing, then the agreement will almost certainly have no validity in a court of law.”
Martin Dasko contributed to the reporting for this article.
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