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Creating an estate plan is a great idea. But it’s important to remember that an estate plan is a living, breathing document that should be updated periodically. “When should I update my estate plan?” is a critical question. The answer depends almost entirely on your unique circumstances. Some individuals may need to update their estate plan every 10-15 years, while others may need to update it annually.
A childless couple who has been married 50 years and has lived in the same house throughout is probably not going to need to update their plan as frequently as is an individual who has been divorced and remarried with children and stepchildren, owns multiple businesses, and invests in valuable artwork. A skilled estate planning attorney can advise you on how often your plan should be updated.
There are some milestones in life, though, that generally indicate a need to at least review – and sometimes update – your estate plan. Some of these milestones include:
It’s wise to review your estate plan annually. This serves as a refresher for you personally, and it will help you recognize elements of your plan that are obsolete, incomplete or need to be updated. To make it easy to remember, you can conduct a routine annual review of your estate plan at the same time you file your taxes each year, on your birthday, every January, or whatever date is convenient when you can put it on your calendar and set aside a couple of hours to review your estate documents. This annual check-up is a good habit to get into because it ensures that everything remains in order.
For significant additions or a major overhaul of your estate plan, we recommend doing this when your family situation changes, you make large purchases, or there is a sizeable change in your income or assets.
Some important Alabama statutes to keep in mind when creating or updating an estate plan include:
Getting married is a huge life-changing event. It can mean years of joy, maturity, and evolving future goals. Creating or updating an estate plan when you get married is the right way to ensure a solid financial foundation for you as a couple.
Buying a House
Purchasing a condo or house is usually the first major investment a couple or an individual makes. Real estate is often the single most valuable asset that individuals and couples have, so you want to be sure to include it in an estate plan. You will want to provide information about how a house, farm and/or land should be inherited.
Each time a couple has an additional child is an important time to update your estate plan. You will want to name guardians for minor children in the sad event that you and your spouse become incapacitated or die suddenly. Guardianship decisions are critical, and this gives you time to have conversations with other adults and make plans for your children’s future.
Children Turning 18 or 19 Years of Age
In many situations, a child turning 18 or 19 years old is when they legally become an adult. They are no longer a minor and are often no longer a dependent of yours. As emancipated adults, rather than minors, your plans for them – from an inheritance standpoint – may change, and you will want to update your estate plan to reflect this.
No one likes divorce, but it happens. It’s prudent to make changes to an estate plan when spouses split up. Divorces are often messy, and emotions run high. A marriage break-down almost always results in a change in assets for both parties, and it has legal implications for children.
Remarriage, Stepchildren & Blended Families
If you find a new partner after divorce and create a blended family through remarriage, it’s definitely time to update your estate plan. A new spouse may have different ideas about spending, investing, inheritances, funeral, and burial plans than do your grown children from a previous marriage. She or he may bring their own children from a first marriage into your new family, and you will want to discuss how this affects your future distribution of assets.
Getting a Promotion at Work
When you get a big promotion at work – especially if it includes performance bonuses or stock options – you will want to account for this in your estate plan.
Selling/Buying a Business
If you sell, buy, or own a business, you will want to address the disposition of your business in your estate plan. Business transactions impact both your business partners and your family, so it’s best to include provisions for this in your estate documents.
Investing in Real Estate, Valuable Artwork, or Expensive Jewelry
Major investments involving tens or hundreds of thousands of dollars are usually a good time to update your estate plan. Such valuable assets like real estate, valuable artwork, and expensive jewelry need to be accounted for in your estate plan.
Retiring from a Career
Retirement is a great time to update your estate plan. Your lifestyle will change — you may be travelling more, moving, downsizing your housing, or liquidating assets. Your investments may change during retirement, too, so you’ll want to account for all of this in your estate plan.
Receiving an Inheritance
If a grandparent or business partner leaves you a significant inheritance, you’ll need to update your estate plan to account for the income or assets, whether they be real estate, cash, collectibles, or sentimental mementos.
Death of a Spouse
If your spouse dies before you do, this is an important time to update your estate plan. Your spouse may have been named the beneficiary of your pension, life insurance policy, and brokerage accounts, in which case you will have to name new beneficiaries. You will also need to address the issue of co-ownership of assets, and co-trustees of a living will, if applicable.
Astute, proactive planning is the best way to avoid future chaos when it comes to end-of-life issues. Far too often, individuals put off creating or updating an estate plan indefinitely, and then something tragic or unexpected happens. This can result in disputes erupting among surviving family members, or it can mean wading through an expensive and lengthy probate process. Sometimes, particularly when there is a surviving spouse who becomes trustee of a revokable trust, disputes arise with adult children, which must be litigated. In other cases, issues around powers of attorney wind up in court, and outdated or vague wills can be contested by loved ones. It’s important to keep your estate plan updated so that you avoid confusion among heirs, hurt feelings, and unnecessary litigation.
If you need to create or update an estate plan, choosing the right lawyer to help you is paramount. An informed, savvy estate planning attorney can make all the difference in helping you minimize tax liability, avoid a protracted probate process, and ensure that your wishes are carried out. Creating and maintaining a comprehensive estate plan is one of the greatest gifts you can give your family, both now and in the future. To find out more about how the skilled attorneys at Caldwell Wenzel & Asthana can help you craft a unique and vibrant estate plan, call us for a free initial consultation at (251) 444-7000.