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Set It, But Don’t Forget It: 5 Reasons to Update Your Estate Plan
An estate plan is not something that you draft…and then forget about it. If you think back on the last several years, you might be surprised how much has happened, and how different your circumstances are. Life is constantly changing, so it is necessary to update your estate plan as these changes occur.
The last thing you want for your estate plan to be unattended. If you fail to update your estate plan, in a time of crisis it might not work as intended, and you will not be able to help your family when they need it the most. But how are you supposed to know when to update it?
The time to revise an estate plan varies. The general recommendation is to review your estate plan every three years. In addition, certain events or circumstances could also prompt such a review:
- You Move to Another State
Estate planning laws vary from state to state. If you move to a new state, you should review your plan with a local estate planning attorney to identify any important differences. Documents such as a Power of Attorney or your Will could be less effective, or altogether invalid.
- Tax Changes
Tax laws are constantly changing, which means that you need to be ready to change your estate plan to account for these changes. One of the most recent changes to tax law, the SECURE Act, updated how inherited IRAs are paid out, reducing the time for payout to 10 years, rather than over the beneficiary’s lifetime. Additionally, with the recent political changes, you want to watch out for changes in the Estate Tax Exemption amount which could significantly impact your estate plan.
- Your Assets or Liabilities Change
Whether your estate’s value has increased or decreased in value, a significant change should be reason for a review of your estate plan. A change in the composition of your estate should also warrant a review. You may have sold assets or added assets that could have a significant impact on your estate plan.
- Your Qualified Retirement Plan is Outdated
Oftentimes we overlook updating the beneficiary designations of IRAs, 401(k)s, and other retirement plans. The beneficiaries of these accounts are determined by the designation form on file in your estate plan, not your will or trust. You want to make sure these are clearly outlined, as the beneficiary designations control who receives annuities, life insurance, and some financial accounts that may not be included in your will or trust.
- Family Changes
When family changes occur —like a birth, death, or divorce—you should update your estate plan. There might be a new child or grandchild that you want to include. A death or divorce in the family are instances where you might want to remove someone. You may have also gone through a divorce, remarried, or became widowed since implementing your will.
Any significant life changes also serve as a good reminder to review and update your estate plan.
To make sure your estate plan is up-to-date, contact the Law Firm of Blanche D. Smith to schedule your initial consultation.