Reviewing and Updating your Estate Plan – When, Why and How

When? How often should your Estate Plan be Reviewed?

Generally, you should review your estate plan at minimum every three to five years and anytime you have a major life change. This isn’t just for those who have all the estate plan documents in place such as a trust. Maybe your estate plan doesn’t warrant a trust now, but it might be needed in the future. If you are an adult, your estate plan should consist of a minimum of and Advance Health Care Directive and Durable Power of Attorney, in case you become incapacitated. Add a simple will and you have the basics. If you have minor children, you will also want to nominate a guardian of your children in case you are unable to care for them. You should also review your plan after major life changes. These include events such as Marriage, Divorce, having Children, moving your residence, purchasing property, selling property, Death (especially of a trustee, agent, or beneficiary), and any time there is a significant change in your assets and liabilities, including your retirement plans. You may also want to review your estate plan when the laws change. Often times a new tax law can impact your estate planning, especially for complex plans that include tax planning. Overall, you are looking to ensure that your current intentions are still compatible with your estate plan as it is in place.

Why?

Going down the list of major life changes:

Marriage and Divorce –

Family dynamics shift and change all the time. When this happens, you should ensure that your estate plan reflects those changes. If you get married, you want to be sure that your estate plan is updated to include your spouse. If you get divorced, you likely will want to be sure that your estate plan is updated to reflect your current wishes. There are certain laws in place which may already have modified your estate plan automatically post-divorce. Also, if you have a partner you wish to care for after you pass, but aren’t married, it is especially important to include this in your estate plan. Without an estate plan in place, such a partner will likely not be able to inherit anything once you pass.

Children –

Anytime children are involved, you need to be sure to consider them in your review process. As mentioned above, you will want to nominate a guardian for you minor children. You will also want to ensure that your children receive the benefit of your hard work after you pass. With modern family dynamics, this can get a bit tricky providing for children from a previous marriage without allowing an ex-spouse control over the money. You may also want to ensure that your new spouse is taken care of without disinheriting your children and possibly include your new spouse’s children from a previous marriage. Stepchildren are not necessarily included as beneficiaries unless you specifically write that into your plan.

Changes in assets and liabilities –

Moving your residence, purchasing property, selling property, retirement accounts, taxes. Anytime you purchase major assets, change accounts, open new retirement accounts, you need to ensure that not only is your estate plan up to date, but that all of your assets continue to remain in trust or list the proper beneficiaries. I would recommend confirming that your trust is properly funded and updating your schedule A (which is a list of trust assets) anytime you review your estate plan and there are any changes. If you have a significant estate, much of the estate planning may be directed toward asset protection and tax savings. Anytime the law changes, you should have your estate plan reviewed to ensure that it complies with current law and your plan will still be carried out according to your wishes.

Deaths – Anytime a loved one dies, you want to review your plan as well. Most importantly, if that person was nominated by you to be a Trustee, executor, agent, or guardian, you want to update those documents asap. You also want to consider any inheritance that person was to receive and what happens to that inheritance now that they are passed. Updates are often necessary if you didn’t specifically plan for the possibility of their death, which can often occur when someone dies unexpectedly.

How? What is the Best Way to Update Your Estate Plan?

Your powers of attorney and will are typically fairly simple documents. They can be modified any time while during the life of the creator. You can update or amend them through various procedures. The powers of attorney can be updated through a formal amendment signed and notarized by you. A will can be updated by a proper codicil, but must comply with California Probate code. You cannot simply update a will just by crossing things out or adding notes. These simple documents are generally quick and easy to update and it is often most efficient to revoke your old documents and create new ones.

If you have a trust, you generally must follow a formal procedure outlined within the trust itself in order to amend or update it. Because a trust is much more complex and also involves a funding process, which previously should have updated titles, bank accounts and other property in the trust, we are more likely to recommend an amendment for simple changes. However, there is another formal process called a restatement, which allows you to completely rewrite your trust, but keep the name, making the updates much clearer and preventing you from having to redo the funding process.

As always, you should ensure that all changes and updates are done properly to avoid any future confusion and/or litigation surrounding your estate and your loved ones. Do some research and learn about estate planning, but most importantly, when establishing or updating your estate plan, speak with a qualified lawyer. The attorneys at Naimish & Lewis are always ready to assist with your estate planning needs.