I always schedule a document review conference with my clients before they sign their Wills. It gives my clients the opportunity to ask questions they may have about various provisions in their documents to that they have a clear understanding of all the provisions in their documents before they sign them.
One of the things I tell my clients during our review conference is that the documents have been prepared based on a snapshot of their lives right now. Just because the documents accomplish their objectives at this point in time doesn’t mean that they will if things change. That’s why I recommend that clients calendar a call to me three years after they sign their estate planning documents, but sooner if something substantial changes in their family or finances.
Time brings changes in tax, property, probate or other laws which could impact your estate plan. For example, in 2000, the estate tax exemption was $675,000 per person. A substantial insurance policy would have pushed an individual over the estate tax threshold. As a result, many estate plans included provisions that created bypass trusts to minimize estate tax liability.
Tax laws changed ten years later when the exemption amount increased to $5,000,000 per person, indexed for inflation. That, coupled with laws that make a deceased spouse’s unused estate tax exemption portable, means that very few estates are now subject to estate taxes. As a result, those whose estate plans created bypass trusts when the exemption was lower should reevaluate whether that type of planning is still advantageous based on their current circumstances.
Additionally, changes can occur your family or finances, which could impact your plan and require changes. For example, I’m currently working for the second time with a couple who just had their first baby. They initially contacted me years ago when they were newly married and needed a very simple plan. Now that they have a child, we’re creating Wills that contain testamentary descendants’ trusts to make sure that any assets they leave their child will be protected for her by someone they trust and distributed to her when and how they intend.
While there are no hard and fast rules about how often you should update your estate plan, the following life changes may trigger a need to do so:
- A change in your marital status
- An addition to your family, either by birth, adoption or marriage
- A substantial change in the value of your assets or in your plan for their use
- A move to another state
- Impending retirement
- Changes in the tax code
- The simple passage of time
If it has been more than three years since you had your Will and other documents prepared, pull them out, dust them off, and read through them to make sure they are still accomplishing your estate planning goals. While you’re at it, also check your beneficiary designations to make sure that they are coordinated with your overall estate plan.
Your estate plan is something that should change as your life does. Otherwise it can become a set of outdated documents that don’t accomplish your objectives or protect the people in your life that matter most.