Lessons from the Pros

Education Resource

When To Review Your Estate Plan

Other than perhaps philosophers, most people do not like to contemplate their own demise. Even fewer enjoy the idea of planning for it! So most folks prepare an estate plan, put it in a safety deposit box and forget it. That could be a fatal estate planning mistake.

Why Should You Review Your Estate Plan?

Properly drafted, a will or a trust can be relevant and useful for many years. However, even the best estate plan merely takes a moment in time and applies the best known information on hand at that time. So, like a healthy person going to the doctor for a routine check-up, an estate plan needs to be checked periodically to make sure it is relevant and effective.

Calculator, pen and paper with typewritten text Family Estate Planning

A good estate plan can be flexible and build in room for growth. For instance, rather than specifically naming two children and indicating they will each receive a 50/50 share of an estate, good drafting would dictate that the same gift should be left equally to the class children so that the plan is effective if there are two, three or ten children at the time of the testator’s death. But good draftsmanship cannot guarantee that a plan will stay up to date.

To keep a plan up to date so that it can do its job, a planner should review the plan periodically. A good rule of thumb is to review the plan every five years. However, it is also a good idea to dust off a plan for review any time there is an important family event like a birth, death, marriage, or divorce.

What Is Reviewed in an Estate Plan Checkup?

The basics need to be checked. Are the planner’s desires the same today as they were when the plan was first formulated? Are all of the beneficiaries still around? Are there any new beneficiaries? A new spouse? Elderly planners might lose children. Younger planners might add children. The people responsible for serving as trustees or executors might have died, moved away, or might no longer be appropriate. New facts may emerge. Maybe the planner has significantly more money and would benefit from estate tax savings trusts. Maybe the planner is now interested in probate avoidance. A child may have demonstrated a lack of maturity that requires assets to be held in trust or to be held for a longer period of time. As people age, their goals and the people they want to benefit can change. A plan review will make sure that the planner’s desires remain satisfied and that the plan effectively deals with those desires.

Access Free Financial EducationAlso, the law may be different. Federal and state estate tax laws have gone through many changes over the last fifty years. Unified credit amounts change. At one point, the estate tax system was abolished and then quickly reinstated. New concepts like the portability of unused spousal estate tax credits emerge. On a state level, many states decoupled their estate tax systems from the federal system. Health care laws and health care privacy laws have changed and ancillary documents like a health care power of attorney need to be checked and possibly updated. And from a planning perspective, state law as it relates to wills, trusts, and property is changing and evolving all of the time. Planners may move or acquire assets in a new jurisdiction. It makes sense to check that the plan’s legalities are up to date.

While an estate plan can last many years, it needs regular check-ups to ensure it stays relevant and effective.

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

Join over 170,000 Lessons from the Pros readers. Get new articles delivered to your inbox weekly.