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When To Review And Renew Your Estate Plan

When To Review And Renew Your Estate Plan

Knowing When To Review And Renew Your Estate Plan

Life can sometimes be unpredictable. If change is on the horizon for you, your estate plan may need a change too. You put an estate plan in place and it addresses all the essentials: Avoiding probate, minimizing taxes, assuring someone to care for you and your assets if you are incapacitated and passing on your assets as easily and inexpensively as possible.  

But changes in your life may impact all your careful planning. So when should you review – and possibly renew – your estate plan? 

The Big Four Life Events – Marriage, Divorce, Birth and Death 

It seems obvious that if you get married or divorced, you need to change your plan. Yet often, a client is coming to me years after they married, with a plan that doesn’t even mention their spouse. Unfortunately, I’ve also had to console the spouse who finds out too late that her husband not only failed to change his will, but also left his life insurance to a former spouse, a sister, or worst of all, a girlfriend. If you are getting married, you really do need to have your estate plan updated.  

Marriage comes with lots of planning for the big day, and it’s easy to put off the work of planning your newly combined estate. After all, you’ve just begun a new life, who wants to think about the end? I like what a client of mine recently said: “I figure if I get the plan in place, I won’t need it for a long time!” My advice: you’ve pledged your love to this person and committed to the marriage. Now put your money where your mouth is and commit to protecting each other with an estate plan. 

On the other end of the spectrum, someone who is going through a divorce needs to evaluate their estate plan as well. If you have separate property – something you inherited from your family, for instance – you need something in writing that says where it goes. If you want your own family to get it, and not the spouse who is divorcing you, a will or trust must state that to assure your wishes are granted. If you pass away during your divorce, you are still married. Your spouse still has all the right he or she had before the divorce action was filed. 

 

The birth of a child is also an occasion to change your plan, or put one in place if you haven’t done so yet. You’ve brought a life into the world or increased your family with an adoption. You want to do all you can to protect your new child. Protection includes making sure things are in place for his care if you are no longer around. 

A death, while bringing grief and pain, also often brings an inheritance, or changes the distribution your plan makes. If your estate has suddenly expanded due to a parent leaving you money or property, it’s vital to take a look at how it affects your plan. 

Moving From State to State 

Another significant life event that should motivate you to review your plan is a move to another state. While your attorney may have assured you that your documents will remain legally enforceable in the new state, a review is necessary to make absolutely certain that is true. A local estate planner can advise you about whether your existing plan requires any changes. 

Although some laws are consistent throughout the country, many states have unique laws that you need to consider in your estate plan. Arizona, for instance, is a community property state. Forty other states are not. This can make a big difference in how your estate is handled. 

Likewise, Arizona has no inheritance or estate taxes. Many other states do. If the plan you put in place in a previous state has a complicated scheme to avoid estate taxes, you may want to change that now that you are an Arizona resident. You may be able to put a plan in place that is much simpler and easier to administer. 

Changes in the Law 

Of course, one of the changes that can make a difference in your plan is nothing you brought about. The federal or state law may change, making a change to your plan a necessity. 

In Arizona, the trust code changed in 2008. Now you can make some distributions in ways that weren’t a good idea in the past. If your Trust was put in place before 2008, a review is a very good idea. 

In addition, in 2012, the federal estate taxes changed. Now, the federal estate tax exemption was raised to $5.49 Million per person (adjusted for inflation). The complicated estate plan you put in place to avoid the much lower threshold for taxes may not be needed. Again, you may be able to put in place a far simpler plan that is easier for your surviving spouse and children to administer. 

A Review Every Three to Five Years 

I recommend that my clients review their trusts with me every three to five years. That way, we can discuss any changes in their lives and in the law. If a change is needed, we may be able to do a simple amendment. If something major has happened, we can amend the entire trust. We tailor the change in the trust to the change in your life! 

I offer a complimentary review for a trust or will that is more than two years old. Contact me at 602-375-6752, libby@libbybanks.com or visit my website at www.libbybanks.com.

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