By Harry S. Margolis
Estate planning attorneys always advise clients to review their estate plans every five to ten years, but who does that? Most people prepare an estate plan when they have children, again when they near retirement, and finally when and if they or a spouse becomes ill or begins to show signs of dementia. If you prepare and update your plan at these three junctures, you and your family will probably be in good shape. But if you don’t, there’s a strong likelihood that your documents will be out-of-date when needed, causing extra cost, delay and stress to your family.
In many cases, however, you should review and update your plan somewhat more often. Here are 10 reasons to review your estate plan:
1. You have experienced a change in your health or family circumstances.
A marriage, a divorce, a death in the family, or an illness or a disability can all be reasons to update your estate plan. The person you appointed as agent on your health care proxy can no longer serve in that role. You don’t want your ex-spouse to receive all of your estate when you pass away. Your daughter’s marriage is troubled. All of these situations mean it’s time to review your plan.
2. The people you have named as agents on your health care proxy and durable power of attorney or as trustee or personal representative are no longer appropriate.
Your health care agent moves to another state. Your attorney-in-fact under your durable power of attorney declares bankruptcy. Your sister who you named as executor of your estate has had to move to a nursing home. It’s time to review your plan. Read our blog post on 7 Decisions to Make for your Durable Power of Attorney.
3. Your financial circumstances have changed significantly.
Your company finally went public and now your have a taxable estate. Or, you haven’t quite got your feet back on the ground since the 2008 recession, so your savings and investments aren’t quite what they once were. That bequest to your alma mater no longer makes sense. It’s time to review your plan.
4. Your durable power of attorney is more than five years old.
Did you experience push-back when you went to use your mother’s old durable power of attorney at her bank? Did they say that it was too old? If so, this was contrary to law. There’s not statute of limitations on durable powers of attorney. But many financial institutions in effect create them by refusing to honor older documents. You can fight them, but it’s not easy. If your durable power of attorney is more than five years old, it’s time to review your plan. Read our blog post on How Many Agents Should You Name on Your Durable Power of Attorney?
5. One of your beneficiaries has experienced or may experience financial difficulties, divorce, or a serious illness.
Your daughter’s marriage has become troubled. Your nephew has been diagnosed with MS. Your son had to declare bankruptcy. Unfortunately, your grandson is struggling with drugs. It’s time to review your estate plan. Read our blog post Beware Beneficiary Designations.
6. One of your beneficiaries has become disabled or has passed away.
Your nephew’s MS has worsened so he must apply for Medicaid coverage. Your niece passed away leaving three minor children. It’s time to review your estate plan. (Sorry about these morbid thoughts.) It’s time to review your plan.
7. You have moved to a new state or country.
Estate planning is a creature of state rather than federal law. While under the full faith and credit clause of the constitution, every state is supposed to honor your legal documents drawn up in another state, every state’s laws are different. Some states honor living wills, some do not. Some require witnesses on a durable power of attorney, some do not. Some have an estate tax, some do not. And that’s just within the Unite States. The rules differ even more from country to country. So, if you’ve changed states or countries of residence, it’s time to review your estate plan.
8. It has been more than five years since you have reviewed the beneficiary designations on your retirement accounts and life insurance policies.
The beneficiary designations on your retirement accounts, life insurance policies, and investment accounts can be just as important as your estate plan. Unfortunately, people often don’t remember what they say or they can be inconsistent with estate plans. We’ve seen many cases where life insurance passes to an ex-spouse or ex-partner because the deceased never got around to making a change. If you don’t have all of your beneficiary designations in a folder at home, it’s time to review your estate plan.
9. You have separated or divorced from your spouse or split with your partner.
Any change of relationship status is likely to mean that you will want to change who gets your estate and who will act for you in the event of incapacity. It’s time to review your estate plan.
10. You have gotten married or are in a new significant relationship.
On a brighter note, a positive change in relationship status also means, it’s time to review your estate plan.
As my partner, Jeffrey Bloom says, you don’t buy life insurance because it’s likely that you will pass away during the next few years, but because you are responsible and need to make sure your family is taken care of when you can no longer do so. The same goes with estate planning. You don’t prepare and update your estate plan because you’re likely to pass away or become incapacitated any time soon, but why roll the dice when you can be certain everything is arranged as you want should worse come to worse.