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Modern Estate Planning Blog

Elder Law & Special Needs Planning

When Should You Update Your Estate Plan?

March 27, 2020

Life is all about change. This is never more true than in relation to your estate plan. When you created your estate plan, it was based on your situation at the time, the people in your life, your financial holdings, the law at the time, and some educated guesses about what and when things might happen. If you think back on the last 3 or 5 years, you may be surprised to realize how many things have changed in your life. It is the constant change that creates the necessity for periodically updating your plan.  

Why you need to update your estate plan

Creating an estate plan is not something that should be completed once and then left in a drawer never to be seen again. You need to keep your plan up to date as the years pass, and your life, the people in it, and the laws around you change. 

When Should You Update Your Estate Plan? | Chubb Law Firm

Let’s compare an estate plan to a car; there are surprising similarities. To begin with, both need periodic maintenance to keep them working so that when we need them, they are there for us.  Both need drivers to make them go. Drivers? Yes, in your estate plan the drivers are your helpers - trustee, executor, agent. And, both need gas to make them go. The gas in your trust is the assets. Ensuring that you have the right plan (car), with appropriate drivers, and plenty of gas at all times will put you in a good position to ensure financial stability for your loved ones, reduce their emotional stress, and guarantee that your last wishes are respected.

If you do not maintain your plan, it may not “work” as you intended in a time of crisis and you will not be able to help your family when they need you the most. 

How do I know if I need to update my estate plan?

If you have experienced any of the following changes in your life, we recommend you update your estate plan as soon as possible:

  • Purchased or sold any of your assets
  • Changed your marital status (married, divorced, lost a spouse or loved one)
  • Changes in your economic situation
  • Retired from work
  • Became a caregiver for your elderly parent or somebody with a disability or special needs
  • You are facing the possibility of going into a nursing home or another form of long-term care
  • Your health care directives were created prior to the HIPAA laws (2003)
  • You have decided to change who is in charge of your medical, financial or final affairs 
  • There have been changes to the laws
  • There have been changes to your beneficiaries 
  • There have been tax changes 

The most common reasons to review and update an estate plan

Marriage, divorce and death 

Any change to your marital status, whether you have gotten divorced, tied the knot, or lost a spouse, is an important reason to review and update your estate plan. 

When Should You Update Your Estate Plan? | Chubb Law Firm

This kind of change is important to your estate plan because you will either need to add or remove a spouse. Do this as soon as possible to make sure your money and healthcare wishes are dealt with according to your wishes. 

A client of ours recently passed away and while working with his spouse, who was trying to collect his federal life insurance, we made a huge discovery. 

Despite the beneficiary change form being filled out with the spouse and submitted to the client’s employer, a court order regarding the husband’s prior divorce designated his ex-wife as the beneficiary for life insurance. The divorce decree was so poorly drafted that it caused a lot of problems for the surviving spouse and unfortunately, under the federal rules, the court order was the governing document, trumping the beneficiary designation. As a result, the life insurance proceeds were paid to the ex-spouse, leaving the current spouse without some important financial support.


When Should You Update Your Estate Plan? | Chubb Law Firm

If you have welcomed a new baby into your home, it’s a good idea to add them to your estate plan to ensure they are taken care of in case the worst were to happen to you or your spouse. 

If you have remarried and want to include children from both your first and subsequent marriage in your estate plan, then you will need to update your plan as well. The same goes for any stepchildren you would like to include in the distribution of your estate. 

Changes of beneficiaries

If you’re thinking of adding or removing any of your beneficiaries, you will need to review your estate plan first to ensure that the changes to beneficiaries will not have a negative impact on your overall plan. It is important to a thorough estate plan that beneficiary designations are carefully coordinated to meet the goals fo the plan.

When Should You Update Your Estate Plan? | Chubb Law Firm

As an example, if a goal of your plan is to leave what you have equally to your children, but name only one child to receive your IRA, that goal will not be met.  

Speaking of beneficiary designations, it is important to name not just primary beneficiaries, but also secondary or contingent beneficiaries, just in case a beneficiary passes away before you do. That extra layer of beneficiaries is important if any of your beneficiaries pass away, and you are unable to update your estate plan. 

Tax changes

When Should You Update Your Estate Plan? | Chubb Law Firm

Tax laws are constantly changing, which means you need to be ready to take these changes into account in your estate plan. 

You should also keep in mind any tax changes if you move to a different state. Your documents will need to be in line with the laws of the state you currently live in. 

One of the most recent tax changes, the Secure Act, made a major change to how inherited IRAs are paid out; reducing the time for payout to 10 years rather than over the beneficiary’s lifetime.

When should you check if you need to update your estate?

If you already have an estate plan in place, it’s a good idea to update it every three to five years. 

A client of ours admitted to sticking their binder on a shelf and not looking at it for 10 years. Luckily, they decided to update it. As it turned out, there were many changes that affected their plan, particularly their relationships with the people they named as their “drivers.” There were also changes to the estate tax laws, their relationships, and their assets. As a result, the structure of their plan no longer met the clients’ needs and goals.

If they had not updated their estate plan, the family would have dealt with unintended tax consequences, the wrong people in the driver seat and endless headaches; all because their plan was not updated. 

If you have not looked at your estate plan in a while, this is a good time to review all documents and double-check the information is up to date. 

Life changes constantly, and it can be overwhelming. If you need help updating or organizing your estate plan, call The Chubb Law Firm today at (916) 241-9661 to review your goals and discuss your options.

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My wife and I have some quite large complexities both in our individual preferences and the construct of our life. When planning for our trust, Heather took the time to hear EVERYTHING we said. The trust which Heather formed for our family took all our concerns into account. When everything was said and done, we received a trust which, by design, is extremely personal to our circumstance. We also are delighted to have Heather to be part of our team of advocates to help when the time comes.

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