Which Life Events Require an Immediate Estate Plan Update?
June 16, 2017
By Cory Howes
Your family’s needs and circumstances are constantly changing, and your estate plan must change as well. An estate plan requires updating when certain life changes occur. These include, but are not limited to, marriage, the birth or adoption of a child, divorce, the death of a loved one, a significant change in assets, and a move to a new state or country.
Marriage: It’s not uncommon for estate planning to be at the bottom of the list when a couple is getting married, whether for the first time or not. Although it may not seem to be a priority, marriage is an event that should trigger an update to your estate plan. You’ve probably already thought about updating emergency contacts and adding your spouse to insurance policies, but there is another important reason to update an estate plan upon marriage. In the event of death, your money and assets may not automatically go to your spouse, especially if you have children from a prior marriage, a prenuptial agreement, or if your assets are jointly owned with someone else (like a sibling, parent, or other family member). Taking another look at your estate plan will ensure that your wishes for your new spouse are met.
Birth or adoption of children or grandchildren: When a new baby arrives, everything changes. And your estate plan should change as well. For example, your trust may not automatically include your new child, depending on how it is written. It is always a good idea to be sure you add the new child as a beneficiary to a trust or will. As the child (or grandchild) gets older, your estate plan should adjust to ensure assets are distributed in a way that you deem proper. For example, what may seem like a good idea when your child or grandchild is a four-year-old may no longer be a good fit when they become a young adult.
Divorce: Some state and federal laws may remove a former spouse from an inheritance after the couple divorces, but this is not always the case and shouldn’t be relied upon as the foundation of your plan. Once a divorce is final, you should immediately update beneficiary designations for all insurance policies and retirement accounts, any powers of attorney, and any existing healthcare proxy and HIPAA authorizations. It is also a good time to revamp your will and trust to make sure it does what you want (and likely leaves out your former spouse).
Death of a loved one: Sometimes those who are named in your estate plan pass away. If an appointed guardian of your children dies, for example, it is imperative to designate a new person to take over that role. Likewise, if your chosen executor, healthcare proxy, or designated power of attorney dies, new ones should be named right away.
Significant change in assets: Whether it is a sudden salary increase, inheritance, or the purchase of a large asset, these scenarios should prompt an adjustment to your estate plan. The bigger the estate, the more likely there will be issues over the disposition of the assets after you are gone. For this reason, it is best to see what changes, if any, are needed after a significant increase (or even a decrease) in your assets.
Move to a new state or country: In most cases, you should obtain a new set of estate planning documents that clearly meet the new state’s legal requirements. Estate planning for Americans living abroad or those who have assets located in numerous countries is even more complicated and requires professional assistance. Learn what you need to do to completely protect yourself and your family when you move to a new state or country.
If you have recently experienced any of these life events, it’s time to talk about updating your estate plan. Contact me at the Forrest Firm to get started. If you want to make sure your plan is updated on an ongoing basis, talk to me about enrolling in our EstateCare program.