Creating an estate plan for your heirs is necessary for your assets to escape probate. It enables you to put your assets into the hands of those you want to receive them. Failing to update your estate plan could cause significant damage and may thwart your desire to give your assets to your chosen beneficiaries.
An estate plan is only as good as it can meet the conditions of a particular stage in your life. Since life often has many changes, chances are that your estate planning could use some revising from time to time. After all, when family or relatives are born or die, children disappoint, and marriages and divorces occur, your plans may need updating.
The Cost of Not Updating Your Estate Plan
You created your estate plan with specific people in mind. Changes in their status or relationship with you could cause you to have a change of heart toward them. It can be particularly awkward if you left your estate to your wife, but now you are divorced and remarried. It would mean that your new wife would get nothing when you died. Most likely, a lawsuit will soon follow your death. A similar problem can occur when a new grandchild is born into the family and they are not listed as a beneficiary in your plans.Financial problems could occur because of poor health, requiring you to sell some assets to make ends meet and pay unexpected bills. There would be a reason for people to be upset with you after your death to discover that the assets promised them are no longer under your care and that there is nothing for them in your estate planning.
Problems With Living Trusts
A common mistake frequently made when setting up a trust is failing to put anything into it. If this happens, the trust is useless because your entire estate will go to probate court for distribution. Going to probate means a considerable portion of the value of your assets will go to paying estate taxes. A trust will overcome this problem when set up correctly.Change Your Appointed Positions
If you have any change of mind about some of the people you had initially appointed, or if they died, you need to update your estate plan. It could include someone you designated as executor, guardian of your children—who may no longer be minors—or trustees. Some of these documents, such as your will, need you to name a primary and secondary person.Your Assets May Have Increased
When your assets have increased since you created your estate plan, your estate plan needs to be updated to include them. Without it, those new assets will go through probate court and be subject to the federal estate tax and possibly your state’s inheritance tax.Fluctuations in Your Investments
The value of your estate usually depends on the worth of your real estate and your portfolio’s performance. Review them with your estate planning attorney to determine if changes are needed. DenhaLaw advises that you protect your assets against taxes, creditors, predators, and inability by putting them into a trust for your beneficiaries.Placing Assets Into the Trusts
When you have a trust, your assets need to be retitled, showing that the trust owns them—not you. Doing so enables them to escape probate. You may also need to put your life insurance and retirement policy into a trust for the same reason. A plan for your business may also need to be added to the trust.Moving to a New State
Each state may have different laws than the one you moved from. It could cause a serious problem and cost you. Forbes says that the new state may not recognize your documents from another state. You can prevent this problem by verifying your new address with your estate planning attorney because some states will claim that if you do not change your address, you are still a resident, and inheritance taxes are due.Some other documents you created may also need rewriting after moving. It could include your will, estate plan, power of attorney, advanced medical directives, and more.
Every time you have a life change, it is a good time to review your estate plan. Avoid the risk of having some of your assets go to pay unnecessary taxes. Review your estate plan with your asset protection attorney every two or three years.