When Do I Need to Update my Estate Plan.png

When was the last time you updated your estate planning documents? Or at the very least, reviewed them?

Has it been 3 years, 5 years, or 20 years? Do you remember where the documents are located or what they say? Do you remember if you have a trust or just a will?

If you have a trust, do you remember what type of trust it is? Is it a joint trust with your spouse or separate individual trusts? Is it revocable or irrevocable?

If you can’t remember the answer to any of the above questions, then now may be the right time to do a proper review.

But when do I need to update my estate plan?

If you don’t feel the need for a review at the moment, but want to be proactive in knowing when one may be necessary, there are several milestones or triggering life events that you should be aware of.

The most common and urgent scenarios are:

Divorce
Terminal illness (you or your spouse)
Death of a loved one
Remarriage
Birth of a child
Inheritance
Moving

Other scenarios when it’s a good idea to revisit your documents are:

Entering retirement
When your child enters or graduates from college
Buying real estate
- Primary home, vacation home, or rental property
Starting a new business
Selling or closing a business
Falling out with a loved one
Death, incapacity or terminal illness of a key person named in your estate planning documents

Let’s cover some of the more urgent items in more detail:

Urgent Estate Planning Update Scenarios

Divorce

Divorce is one of the most common triggers for updating your estate planning because your old estate planning documents likely contained reciprocal language that involves your ex-spouse. You and your ex likely named each other first as the primary person in each role - i.e., the personal representative, power of attorney, and health care proxy. More importantly, you probably named each other as the primary beneficiaries, which may no longer align with your current intentions.

For that reason, you now need to review your documents and consider who you would like to have in charge of helping you if you become incapacitated and who should be in charge of administering and/or managing your children’s inheritance (generally, not your ex-spouse).

Marriage / Remarriage

On the flip side, if you’ve just gotten married or remarried, any existing estate planning documents likely need to be modified to state whether you intentionally want your new spouse as part of your estate plan. There are some limitations on what you can’t do with your estate plan now that you are married (see our other article on does my spouse need to know about my estate planning?), but you want to be very clear on what would happen to your assets if you predecease your new spouse. You do not want to make the assumption that your new spouse would pass it onto your children (especially if your or your ex’s children are from a separate relationship).

Terminal Illness

If you or your spouse are terminally ill, you will want to consider whether you need to update your estate plans to protect your portion of the assets. For example, if one of you is going into a nursing home, you may need to switch beneficiaries on your trust and update your financial accounts accordingly (otherwise, your children’s inheritance may go straight to the government).

If you already have an irrevocable trust (also known as medicaid trust), then you will want to revisit that document to see if now is the time to update the limited power of appointment. If you are unsure whether this applies to your trust, give your estate planner a call and they can let you know with a quick glance at the document.

If you don’t have backups on your documents, you’ll want to make sure you have them now, or update them accordingly.

Birth of a Child

The more straightforward of life events - in this situation you should have a will at a minimum that accounts for your children (and any future children born or adopted thereafter by you) to make sure you’ve selected a guardian preference - otherwise, the state will try to figure that out for you.

Whether you need a trust or not (if you are just starting out), really depends on your current financial situation and subjective preferences. Check out our article on whether you need a will or a trust (or both) for more information on this sub-topic.

If a triggering event has not occurred in years, when should I review my estate plan anyway (as a result of time passing)?

While all of the above items are substantial triggering events that will require you to review and potentially update your estate plan, it’s also a good rule of thumb for you to review your estate plan once every 3 to 5 years.

The reason being, even if one of the substantial life events hasn’t been triggered, it’s possible that your perceptions or philosophy on life have changed through your more recent experiences.

For example, you may have made assumptions in your old estate plan over which child would need the money more than others, or which age they would be okay getting the money outright. Or which person you feel is best to serve within a certain role within your estate plan - for example, the executor, the trustee, or the agent named under your health care proxy or power of attorney.

Or perhaps, you may have initially thought to leave everything equally to your children, but now you would like to cut out a certain percentage to go directly to your grandchildren. Or maybe you want to carve out a small piece for a charity or another cause that you’ve grown to appreciate over time.

Maybe there was a certain condition or restriction that you placed within your documents, that you feel is no longer necessary or is too strict (or maybe is too lenient).

For all of these reasons, now may be the right time to update your estate plan.