Setting up an estate plan is a wise and responsible decision. Once your estate plan is established, you can have peace of mind knowing your financial affairs are in order and your loved ones will be taken care of when you pass away.
However, even a solid estate plan should be regularly reviewed and updated if necessary to make sure it still reflects your wishes. While there is no set timetable for when you should update an estate plan, it is a good idea to review and update when the following events occur.
Birth or death
You must update your will after the birth or adoption of a new child. If you do not have guardians appointed, you may want to appoint guardians for the child. The birth or adoption of new grandchildren or children in your extended family might also be a reason to update your will.
When a child becomes an adult, your will can be updated to remove the guardianship clause.
The death of a spouse, children or anyone else named in your will could be another reason to update your will. This includes anyone you named as a guardian or executor.
If you pass away and your executor is no longer living, a court will appoint an executor. This may not be someone you would have chosen or wanted to carry out the responsibilities of an executor.
Marriage or divorce
When you marry or divorce, your estate plan should be updated. You are likely to have a spouse designated as a beneficiary on various accounts or insurance policies. A divorce or remarriage does not automatically change a beneficiary designation.
Sometimes new spouses are given the bad news that they will not inherit as they expected because their spouse never updated their estate plan.
An estate plan often includes more than a will. There are many different types of trusts that could help you achieve your estate planning goals.
One of these is a special needs trust. If a spouse, child or other family member becomes ill or disabled, a special needs trust allows the to preserve assets without disqualifying them from Medicaid or other disability benefits.
Illness or disability might also be a reason to create or update a medical or financial power of attorney. A medical power of attorney allows you to appoint someone to make medical decisions on someone else’s behalf, while a financial power of attorney does the same with financial decisions.
Changes in your financial situation
Finally, updating your estate plan is a good idea when your financial situation substantially changes. This could be if you receive a major salary increase, accept a new position or inherit money or property. These are all changes that should be reflected in your estate plan.
Since these are major life events that often substantially change your life, it is understandable that updating your estate plan might not be on your mind when they are occuring.
If you do not remember to update your estate plan during one of these events, it is best to review it every few years. Placing a note in your calendar or schedule can help you remember to review your estate plan.