How Often You Need to Update Your Estate Planning Documents

Date: 05/18/22

Author: Prime Law Group 

Whether you’re parents to very young children or you have great-grandchildren, at some point, you’ll be leaving your estate to someone. According to SmartAsset.com, retired Americans expect to leave, on average, $177,000 to their heirs. That’s a lot of money that could go to the wrong people if your estate documents are outdated.

Life’s circumstances can change significantly throughout its various stages, and so should your estate plan. Here is what you need to know about when and how to update estate planning documents.

What Documents Should Be Part of an Estate Plan?

There are several estate planning documents that you might have. This list is not exhaustive, but your estate planning documentation may include:

  • Last will and testament
  • Living will
  • Life insurance
  • Revocable Living Trust
  • Healthcare surrogate
  • Durable Power of Attorney
  • Retirement plans
  • Any other documents that have named beneficiaries

 

While you won’t require all of these documents when you first begin estate planning, you’ll eventually need most of them.

How Often Should You Update Estate Planning Documents?

Estate planning experts recommend you review and revise your estate plan every one to five years and after any significant life events.

By keeping your estate documentation up to date, your documents remain in line with your wishes and in compliance with current tax law. It will also help your family avoid conflict and court if there is confusion about your intentions as to how your estate is supposed to be divided upon your passing.

Whether you have a simple or extensive estate plan, you want to have all documents reviewed and updated as necessary. Some people think that as long as their will is up to date, their estate will be distributed accordingly. But laws vary by state as to which legal documents may supersede what is outlined in a will.

If your will states that your IRA will go to your current spouse, but the IRA has your ex-spouse listed as the beneficiary, the state may have to determine who actually gets it. Situations such as this are why reviewing and updating estate planning documents is essential after any of the following events.

Marriage

When you get married, you will likely want to add your spouse as a beneficiary on any retirement and investment accounts and life insurance policies. Additionally, you may want to name your spouse as:

  • Your Durable Power of Attorney to make financial decisions for you in case you can’t
  • The executor of your estate
  • Your healthcare surrogate to make medical decisions for you if you can’t
  • Trustee, if you have a trust

Children

When you have a child, you will have several estate planning decisions to make, and these decisions will need to be reflected in your estate planning documentation. You will need to decide who will become your child’s guardian if something happens to both parents. You’ll also want to consider if your child will receive any assets upon your passing and at what age.

Of course, you will want to do this after the birth or adoption of each child or if you have step-children at some point.

Divorce

Updating your estate plan is especially important after a divorce. Many of the changes you made to add your spouse will probably need to be updated. If you have not updated your estate plan since a divorce or a new marriage, an update should be a priority.

Beneficiary Changes

If you update your beneficiaries, whether you add someone or remove them, you also need to update all applicable estate documents. When changing beneficiaries on a retirement plan, you want to make the update with your plan provider and estate plan documents, so they are the same. This will avoid confusion about who the rightful beneficiary is after you’re gone.

If a beneficiary has passed away, you should update your estate plan with new beneficiaries and reallocate assets among current beneficiaries.

Major Financial Changes

If you own real estate, investments, or a business that has experienced a significant change in value, whether positive or negative, you should update your estate plan accordingly. With a significant shift in wealth, you may want to reallocate the investments or property differently among your heirs or beneficiaries.

Updates may also be necessary if you have purchased or sold a considerable asset. Whether or not you add new assets to your trust or will is something you may want to discuss with an estate planning attorney

There may be a tax benefit of adding an asset to a trust so it can avoid probate. Either way, you should revise your estate plan to reflect the new asset.

Tax Law Changes

If you move to a new state, you must ensure your estate plan follows all state laws. It would be best if you had an estate attorney who practices in your new state review your documents since they will know the state laws.

Tax laws are continually changing, so whether you’ve moved out of state or not, you still may need your estate plan updated to reflect any tax law changes. A good estate attorney will inform you of them. Still, you should also occasionally check in with your estate attorney and ask if there have been any changes that you need to address with document updates.

Health Changes

Hopefully, you keep your estate plan up to date. Still, a significant decline in your health or terminal diagnosis is a critical time to review and update your estate planning documents. You want to ensure that your estate documents reflect your wishes for who will inherit your property and assets when you’re gone.

This might be a good time for an estate planning attorney to go over all of your estate plan documentation. It will ease any worries you might have about leaving your loved ones with the burden of untangling your estate after you’re gone.

Retirement

Many people plan for retirement most of their adult lives. However, they don’t always think to update their estate plan. In retirement, you no longer have a job to provide income. Your finances may change drastically, and your estate plan should reflect these changes.

Your children are usually older and possibly married with children by the time you retire. You may decide to update provisions in your estate documents to leave something to your grandkids.

DIY Estate Planning Documents

It is becoming more common for people to begin their estate planning by creating a simple will and other documents online. Updating such documentation is not always convenient, and you have no guarantee that the documents comply with state law.

You should have these documents reviewed by an estate planning attorney. Then your attorney can update them for you as necessary. This can save you from having to make updates yourself and provide peace of mind that the documents will legally stand as you intend.

Why Use an Estate Planning Attorney To Keep Documents Up to Date?

With so many reasons to review and update your estate plan, you can see why staying on top of updates is crucial. If you don’t go through the process after significant life changes or when you change your mind about some estate detail, part or all of your estate could go to the wrong person.

No matter why you review and update your plan, an estate attorney can ensure that any changes are valid and comply with the laws of your state. You don’t want an heir to miss out on their inheritance because you did not take time to review updates with your estate attorney or fell behind in keeping estate documents updated. 

An estate planning attorney can ensure that:

  • Your estate plan includes all of the documentation that you need
  • Your current wishes are reflected in all documentation 
  • All life changes have been addressed and updated as necessary
  • All documents comply with state and federal law

Are Your Estate Planning Documents Up to Date?

Having an improperly prepared or outdated estate plan can cause your heirs as much difficulty after you are gone as having no estate plan at all. As you age, your estate planning documentation becomes more complex, and it becomes easier for necessary changes to be missed if you try to maintain documentation without professional help.

Hiring an attorney to update estate planning documents can save your heirs from the time and steep legal fees it could take to sort out an unclear or outdated estate plan. It will also ensure your true wishes are carried out.

Our lawyers are proficient in crafting comprehensive estate plans and keeping them up to date and compliant with tax law. Whether writing a will or preparing special needs or tax-sheltering trusts, Prime Law Group fully understands all that makes up an estate plan. If it is time to have your estate planning documentation reviewed, contact us today.

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Let us Help you take that next step, call us today for a free consultation at Prime Law Group, LLC.

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