Estate planning is an essential aspect of financial stewardship and long-term preparation. However, simply creating an estate plan is not enough. Periodically updating your estate plan is equally crucial to ensure that your wishes are accurately reflected and legally enforceable. Read on to learn more about why frequent reviews and periodic updates to your estate plan are necessary, and how they can save you and your loved ones from potential complications in the future. Here are some of the questions you may have:
Why Should You Review Your Estate Plan After Major Life Events?
Life is full of changes. Marriage, the birth of a child, divorce, and the death of a loved one are significant life events that can drastically alter your financial and personal circumstances. When such milestones occur, it’s imperative to revisit your estate plan.
For example, marriage might necessitate adding a spouse as a beneficiary or Executor under your Will, or updating your Power of Attorney to name the spouse as an agent. Conversely, divorce might require removing an ex-spouse from these critical roles. Failing to update your estate plan after such events could lead to unintended consequences, such as assets being distributed in a manner contrary to your current wishes, and in the very least may create substantial confusion after your death.
Additionally, the birth of a child introduces new considerations. You might now want to appoint a guardian for your minor children or set up a trust to manage their inheritance responsibly. In the unfortunate event of a death in the family, you may need to redistribute assets or update beneficiaries.
By reviewing and updating your estate plan after major life events, you ensure that it remains relevant and reflective of your current family situation.
How Often Should You Reevaluate?
While updating your estate plan after major life events is crucial, it’s also wise to review it periodically, even in the absence of significant changes. It’s generally best to review your estate plan every three to five years. This regular assessment helps ensure that all documents are up to date with current laws and regulations, which can, and do sometimes, change over time and affect your estate plan’s validity and efficacy.
For instance, tax laws frequently change, and these changes can have significant implications for your estate. Regularly consulting with your estate planning attorney can help you stay informed about these changes and make necessary adjustments.
Additionally, your financial situation may evolve over time. Regular reviews allow you to update asset valuations, account for new investments, and remove assets you no longer own. By doing so, you maintain a comprehensive and accurate estate plan that aligns with your current financial reality.
What Are the Risks of Neglecting to Update Your Estate Plan?
Neglecting to update your estate plan can lead to several complications and unintended outcomes. One significant risk is that outdated beneficiary designations might not reflect your current wishes, potentially causing disputes among heirs.
For example, if an ex-spouse remains listed as a beneficiary because you forgot to update your documents after a divorce, it can create confusion and conflict during the estate settlement process. Even though New York Law revokes dispositions to an ex-spouse upon the judgment of divorce, it is incumbent on you (or your Executor) to promptly notify a life insurance company (or other asset custodian where that spouse was named a beneficiary) of the divorce if you wish to prevent them inadvertently paying out to the ex-spouse. Likewise, gifts in your Will made to a stepchild, sibling, or parent of an ex-spouse are not automatically revoked by divorce from that ex-spouse.
Moreover, failing to update your estate plan can result in missed opportunities for tax savings and asset protection. Laws surrounding estate and inheritance taxes change, and your plan should adapt accordingly to minimize such tax liabilities.
An outdated estate plan may also overlook newly acquired assets, leaving them without proper instructions for distribution, which can lead to legal battles or distribution to unintended beneficiaries.
Another risk is the possibility of appointing an unsuitable executor or power of attorney. As relationships evolve, the individuals you once trusted to manage your affairs might no longer be the best choices. Without formally revising your Health Care Proxy, Power of Attorney, Will or Trust, such persons generally cannot be removed from their appointment without considerable stress and court involvement. Regular updates ensure that the people responsible for executing your estate plan are still appropriate and willing to serve in these roles.
If you’d like to review or update your estate plan, please don’t hesitate to contact a skilled Rochester estate planning lawyer from Lacy Katzen LLP today.
