Believe it or not, many people who come in to meet with me already have an estate plan in place. But just because you have a plan in place doesn’t mean you don’t need to update it.
So when is the right time to update your estate plan?
Right now, my Wife and I are in the process of updating our own estate plan, which we first finalized way back in 2010. Since that time, we have had two additional children, lost some pets that were listed in our plan, and my Mother (a beneficiary under my older plan) has passed away. We also lost touch with several beneficiaries of our plan and felt that we needed to update it.
Should You Update Your Estate Plan?
New kids, new pets, death in the family, new circumstances. Those are some of the many reasons that we chose to update our estate plan. Here are nine additional reasons that you may want to consider if you are thinking about updating your own estate plan, even if you already have one in place. (And if you don’t have one in place, now is as good a time as any to start the process!)
#1 You Haven’t Looked at Your Estate Plan in More than Three Years
This is probably one of the most common reasons to update an estate plan. People prepare their plan, shove it in a drawer, cross that item off the list of things they need to do, and forget about it.
This is a big mistake.
An estate plan is a set of living, breathing, documents. I liken it to the US Constitution. This may seem a bit hokey, but hear me out.
Did the founding fathers draft a constitution and set it aside and say, “let’s go run a country, we’ve got all the laws we need?” No. Things change over the years, and statutes change.
Your estate plan should change as well.
We recommend reviewing your estate planning documents at least once every three years, at a minimum, and offer this review service to our clients free of charge. If you can review your plan every year, that is even better.
#2 You Got Married
Major life events are a good time to update and review your estate planning documents. Getting married is one of those life events.
After you get married, you are legally tied to another human being until one of you dies or you get divorced. Presumably, you want to make sure each of you are taken care of in the event something happens to one of you, typically a death or incapacity.
And although there are many statutory rules that give you certain rights as a married couple, there are many limitations to those rights as well.
For instance, consider the story of Terri Schiavo, who was only 26 when she suffered cardiac arrest and fell into a persistent vegetative state. After 8 years of treatment and rehab, her husband wanted to remove her feeding tube, while her parents fought him on that decision in the courts for 7 years… all the way up to the US Supreme Court and back multiple times. Don’t let that happen to you.
#3 You are Getting a Divorce
Just like marriage is a good time to review your estate plan, so is the difficult time when you decide to get divorced. I’ve written about this before, but let me reinforce how important it is to review and update your estate plan when you are going through a divorce.
The last thing you want to do is leave important medical or financial decisions to a spouse that you haven’t talked to in several years because of a contentious divorce. In addition, you want to make sure that your retirement and life insurance beneficiary designations are updated appropriately.
#4 You Had a Baby
As a father of three young kids myself, having a baby is one of life’s true miracles. But with it also comes a lot of responsibility.
One of those responsibilities is to make sure your minor child is taken care of in the event something were to happen to you and/or your spouse.
We work with lots of young families and offer a customized Kids Emergency Action Plan, or (KEAP Your Kids Safe Plan) to parents along with every estate planning package. This plan will name temporary, emergency guardians for your children, and provide instructions to those caregivers in the event you are not around to give the instructions yourself.
#5 One of Your Beneficiaries Passed Away
As I mentioned above, my Mother was a beneficiary under my estate plan. However, she passed away in 2016. It is common that children leave their parents, who frequently pre-decease their children, as named beneficiaries in their estate planning documents.
If you have a loved one or parent that has passed away and was named as a beneficiary under your estate plan, this is a good opportunity to review and update your plan.
#6 One of Your Beneficiaries Got Married
If you have grown children, some of them may eventually get married. You may or may not like the person they chose to marry, and this could impact how you choose to treat them under your estate plan.
In some situations, you may feel that their marriage was doomed from the start, and you may want to protect your child’s inheritance from a possible divorce situation. An asset protection survivorship trust may be a smart decision in these situations.
As a practicing family law attorney for 12 years, I’ve seen countless cases where individuals received sizable inheritances just to commingle those funds with marital funds and be forced to split those assets with their spouse.
This can be avoided, however, with effective estate planning.
#7 You Bought or Sold a House
Buying or selling a house is an ideal time to revisit your estate plan. Many times you will be managing lots of financial documents so you can qualify for a mortgage, or you will be receiving a large cash infusion from the sale of a property.
In these situations, it can be smart to take some time to review your overall financial goals and update your estate plan. Also, if you are purchasing a house, you may want to consider adding it to a Revocable Living Trust.
#8 You Received an Inheritance
If you have received, or anticipate receiving a large inheritance, you may want to update your estate plan. Depending on how well you have done financially, this may be the largest source of cash you have ever received, and you may want to protect those assets from potential creditors, a lawsuit, or a possible divorce situation.
Sitting down with an estate planning attorney might be a smart idea if you receive a sizable inheritance and either don’t have an estate plan in place or haven’t looked at your plan in several years.
#9 You Bought or Sold a Business
If you recently purchased or sold a business, this is another ideal time to review your estate plan.
In the event you bought a business, you may want to plan for what would happen to the business if something happened to you.
- Do you have a buy-sell agreement in place?
- Have you purchased life insurance to fund the sale of the business in the event you were to pass on?
- Have you named people who could manage the business, including bank accounts, payroll, and other financial details, in the event that you became incapacitated?
Alternatively, if you sold a business you may be receiving a large amount of cash – sometimes millions of dollars. If you don’t have a plan in place, or if you haven’t looked at your plan in several years, this is a smart time to take another look at your estate plan.
Depending on how much money you received from the sale of the business, you may want to consider setting up an asset protection trust or other such entities to keep your assets safe for future generations, or even to start doing some Long Term Care Planning.
BONUS: You Retired or are Thinking About Retiring
The last scenario where you may want to consider updating your estate plan is in the event that you decide to retire. At the age of retirement, many people start to receive pensions or other benefits from jobs that they have had for many years. You may be thinking about drawing social security as well.
There are lots of moving parts involved when someone starts to think about retirement, or actually decides to stop working. Clearly, this is a smart time to sit down with an estate planning lawyer to review your plan if you haven’t done so recently.
Do You Need to Update Your Estate Plan?
We are happy to help you. Many of our clients come to us with existing or incomplete estate planning documents that they haven’t looked at in many years. We are more than happy to sit down with you and review your existing plan and help you determine whether updates need to be made.
To schedule a planning session, simply call our office at (919) 460-5422 or fill out our online contact form. We are currently waiving the $350 planning fee for prospective clients that can return some completed paperwork to our office prior to their meeting.
Jim Hart is an estate planning attorney in Cary, North Carolina. The Hart Law Firm, P.A. serves residents of Cary, Apex, Holly Springs, Raleigh and all of Wake County.