When to Review or Revise your Estate Documents
There are certain times when you should consider reviewing your estate documents to determine if they still meet your needs. Sometimes it is based on specific relationship and life events, such as marriage, divorce, birth of a child, or death of a loved one. Other times it is based outside events, such as on the passage of time, growth of your estate value, changes in the law or desire for a different distribution of your estate.
Relationship and Life Events
A life event is generally an obvious time to review your estate plan and consider making changes. Because the life event affects you directly, you are able to know when a change to your documents might be necessary. If you have worked with me in the past, you might recall me saying that your Will is flexible for certain life changes. Even so, it is prudent to review the documents to consider if it would be best to update the estate plan to reflect your current life circumstances.
Marriage or Divorce
A change in your life circumstances may be causing you to reconsider the distribution of your estate, whether by your own choice or by law. In particular, New York State law (EPTL Sec. 5-1.1-A) requires that you provide a portion (approximately 1/3) of your estate to your spouse. In the absence of a pre-nuptial agreement, it may be necessary to revise your documents accordingly. If you become divorced, you may have to revise your estate plan to comply with a Separation Agreement or Judgment of Divorce.
Birth or Death
The birth of a child is always a cause for celebration! You may want to include the child as a beneficiary of your estate or create a trust for the child. You will want to consider who to appoint as guardian of your child if both parents are deceased. This may be a difficult decision to make, but this should not deter you from finalizing your Will because you can always update the appointments later. Without naming a guardian, it will be up to the Court to determine who is the best person to care for the child and it may not be your first choice.
If someone named in your Will dies, consider revising the Will to clear any confusion as to the person’s bequest. You may want to change the distribution of your estate as a result of the person’s death. It is just as important to consider revising your Will or Trust if a named fiduciary dies. You will be able to appoint a successor to ensure there is no gap in administration of your estate or trust.
Outside Circumstances
It is important to be aware of outside circumstances, such as those without a specific identifiable life event, which may affect your estate.
Passage of Time
Clients frequently ask me when they should review their estate documents. If there is no life event, your estate documents may work just as well many years after being finalized. But a good rule of thumb is to review your documents every two or three years. It’s as simple as reading through the documents you have and deciding if you want to make any changes. As you read the documents, consider if you have any questions on the impact of certain provisions or changes in the law.
Growth of Your Estate Value
If you notice that the value or your assets has appreciated since your estate documents were finalized, you should consider reviewing them to determine if tax planning is necessary or beneficial.
The growth of your estate may also provide additional options for distribution of your estate. This includes adding new beneficiaries, creating trusts or providing for charities.
Changes in the Tax Law
For most of us, it is easy to become aware that there has been a change in the tax laws. When such a law is passed, you should review your estate documents to consider if the tax law may impact your current estate plan.
Estate tax planning can only be done while you are alive through your Will, trusts or gifting. If you die intestate or with documents that do not include proper drafting specific to minimize estate taxes, your estate will be subject to estate tax that could have been avoided.
Desire for a Different Distribution of Your Estate
It is common for individuals to revise their documents to modify the distribution of their estates. This may include adding or removing a beneficiary, changing bequests, providing for a disabled beneficiary or modifying a named fiduciary.
Some changes, such as modifying a named fiduciary, may be done easily by use of a Codicil. Substantive changes generally require preparing a new Will or amending and restating an existing revocable Trust.
Be Proactive in Updating Your Estate Plan
Estate planning requires you to makes serious decisions about people and matters that you care about. You may want to “set it and forget it” once your documents are finalized, but don’t let your estate wishes become stale or ineffective because your circumstances changed since finalizing your estate.
If you are considering changing your estate documents, please do not hesitate to contact me. If I previously prepared your estate documents, I will be happy to review the documents and have a brief complimentary discussion on whether changes should be made.