Our lives are constantly changing, and our estate plans need to reflect that fact. Although most of us only feel the need to review our documents after a significant change like marriage or the birth of a child, estate planning professionals recommend reviewing estate plans every few years to make sure they still line up with your desires. Regardless of significant life changes, we may have changes of heart or preferences that require us to update our documents.
In addition to general reviews, you will likely want to update your estate planning documents after any of the following life events.
1. After the Birth of a Child
It’s instinctual to want to provide for our children, and one of the best ways to do so is to include them in estate plans as soon as possible. That way, you’ll have peace of mind in knowing they will be taken care of if you are unable to do so.
No one likes to ponder their own death, but it’s necessary to consider all circumstances when planning for the future. If your children are minors or have disabilities, you’ll need to include additional provisions for them in your Will to account for an early death.
Conversely, you may want to update your estate documents once your children are grown and no longer require a legal guardian.
2. After Getting Married
New York State has a rule that a Surviving Spouse, no matter how long they have been married to a decedent, inherits at least 50% of the Estate. For some – this rule reflects their wishes accurately. For others – this is a travesty, as they want their asset going to children from prior relationships. Yet for others, typically in long term relationship, this is too little, as they want the Spouse to inherit 100% of the assets.
There’s no guarantee that our spouse will automatically inherit the correct amount from our estate should we pass before them. You need to specify your actual wishes in a Will or a Trust. That way, they can avoid assets going to unintended parties and ensure their significant other receives the desired amount. Furthermore, married couples often wish to name each other as a power of attorney or health-care proxy.
Alternatively, you may NOT want your new spouse to inherit your assets. In this case, either a prenuptual agreement or a post-nuptual agreement may be necessary to spell out the inheritance.
3. After a Divorce or Separation
As mentioned above, most married couples have jointly-held assets or have named each other as beneficiaries of their estate. Naturally, most couples will want to dissolve those ties if they get a divorce.
Post-divorce is the time to review any trust, Will, beneficiary designation, life insurance, power of attorney, or advance directive documents, among others. That way, you can ensure your ex-partner will not inherit any assets you would rather go to children or other beneficiaries.
4. Planning for Retirement
As retirement approaches, we need to review our accounts to make sure everything is in order. Are all intended beneficiaries of retirement accounts listed? Is there an undesired beneficiary still listed, such as an ex-spouse or a sibling or a predeceased parent?
Be sure to update beneficiaries on IRAs, 401ks, and other retirement plans, as these documents often go unreviewed for several years. By designating beneficiaries of a retirement plan, you can control who receives annuities, life insurance, and other assets.
5. Planning for Long-term Illness
As chronic illnesses progress, they may impede our ability to understand the entire scope of our estate planning documents. For this reason, it’s always a good idea to review your will and other estate documents soon after diagnosis. You may want to consider hiring an advisor or attorney to help you plan for the future.
Documents such as a living will afford us some control over our health care outcomes. A living will allow us to address our wishes for treatment options and designate a medical power of attorney should we lose the capacity to make medical decisions.
6. After a Change in Assets or Finances
Where assets are involved, taxes are involved. If you purchase or sell a property, start a business, purchase stocks, or otherwise, you will need to review your estate documents. The same applies after acquiring significant wealth or debt.
If you intend to leave a substantial asset to a beneficiary, you may want to consider putting it in a trust. That way, the beneficiary will have easier access. And if you inherit an asset yourself, there are likely taxes to be paid. Consult your estate attorney as soon as possible about inherited assets.
7. When Tax Law Changes
Due to changes in political power, tax law frequently changes in the United States. It’s essential to keep up with changes in tax law so we can adjust our estate plans accordingly. For example, in 2021, estate tax threshold is likely changing from $11.7MM per person to $3.5MM per person. This change will impact a lot of people. Will you be affected?
8. After Moving to Another State
Each state has unique laws governing estate planning. If you move out of state, you will need to review your estate planning documents. Take into account that tax law varies by state as well. Inheritance laws, estate taxes, Medicaid rules, probate rules and power of attorneys – all of these are state specific. If you moved to another state, you should discuss your situation with a local attorney within a year.
9. In Summary
Remember that your documents need to reflect the changes in your life. Do not leave it to chance, review your documents every few years. Contact our office for a consultation if your circumstances have changed recently.
Katya Sverdlov, CFA, Esq.
Sverdlov Law PLLC
30 Wall Street, 8th Floor, New York NY 10005
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