New Years Resolution: Update Your Estate Plan

New Year’s Resolution Updating Your Estate Plan

New Year Resolutions are popular this time of year. Many of us resolve to lose weight, to start exercising, to become a better you.  This year, why not add review your estate planning documents, including your Will, Trust, Power of Attorney and Health Care Proxy, to your list of resolutions.  If you don’t have an estate plan, now is a good time to resolve to get it done.

It is recommended that your estate planning documents be reviewed at least every 3-5 years to make sure they still comply with your wishes.  As you get yourself in order, ask yourself the following questions:

Does your estate plan accurately reflect your wishes for how and whom you would like your property distributed?

If you’ve experienced a major life event since you wrote your will such as a significant change in your financial circumstances, a change in your marital status, the death of a family member or designated beneficiary, a decline in your or a beneficiary’s health, the birth of a child, or the mere passage of time, you should review your estate plan to ensure it still reflects your wishes.  For example, if you married or divorced since you last did your estate plan, fiduciaries and beneficiaries named in your documents should be reviewed.

Any number of changes may suggest the appropriateness of reviewing your overall estate plan.  While documents that you signed years ago do not become invalid or stale merely due to the passage of time, they can become inconsistent with your current wishes.

Has there been a significant change in your net worth?

If you recently won the lottery or received a large inheritance, you will need to reevaluate your plan to determine whether your estate is taxable for both state and federal purposes.  If so, you will likely want to revise your plan to minimize these taxes. On the other hand, if your estate has declined in value, you should review your plan to insure that it still makes sense in light of your lower net worth.

Are your assets held and titled in a manner that coordinates with your estate plan?

You want to make sure that all new assets are accounted for and included in your estate plan.   If you acquired a new business or real estate, you should revise your plan to reflect how those assets will be disposed. Coordinating the title of your assets is especially important for those whose plans are structured to take advantage of the Massachusetts or federal estate tax exemption amounts.  Otherwise, your advance planning could be for naught.

Have you had or adopted a new child since you last did your Will?

If you or a beneficiary has had or adopted a child, you should review your plan to insure that the new child is included.  You will also want to include an appointment of a Guardian and Conservator for your minor children.  This allows you to decide who you want to care for your children should you pass away.  Without a Guardian and Conservator appointed in your Will, a judge will decide where your children will live and who will care for them.   If you have children, you may also want to consider trust provisions which allow you to decide how an inheritance is to be used for the benefit of your beneficiaries (i.e, for medical and educational purposes) and at what age a beneficiary is entitled to outright distribution of your assets.

Have there been any significant changes in your life or the lives of your beneficiaries or fiduciaries?

Significant changes in your own life and in the lives of your beneficiaries or fiduciaries may require changes in your estate plan.  Does a beneficiary have creditor issues.  If you or a beneficiary becomes seriously ill or disabled, you may wish to revise your estate plan to accommodate the increased needs of that individual.  This is especially true if a beneficiary has special needs and receives government benefits.  You will want to consider a Special Needs Trust to protect assets for the disabled beneficiary without disqualifying him or her from receiving government benefits.  As you and your spouse age, you may also want to consider the financial ramifications in the event that you or your spouse may require long-term nursing home care.  You may want to update your estate plan to insure that some portion of your assets is protected from nursing home spending.

It is also important to routinely revisit the people you’ve named as a fiduciary.  As time passes, the people you name as guardian or conservator or your minor children or appointed to execute your estate or make decisions for your health or financial affairs may no longer be appropriate.  If a beneficiary or fiduciary moves away or you lose touch with them, you may want to reevaluate your plan to insure that your property is still going where you want it to go and that the fiduciaries you named are still the best choice. Or, if a beneficiary or fiduciary named in your estate plan has died or has become incapacitated, then you should considering updating your plan to remove that person’s name and/or insure that replacements are appointed.

Are my life insurance policies and other accounts up-to-date?

Review the beneficiaries for your life insurance policies and other accounts.   Contact your insurance company, retirement plan coordinator and/or your financial institution and request a copy of the beneficiary designation for each of your accounts. Insurance proceeds and assets with a beneficiary designation pass outside of your will so you should ensure that the beneficiaries are correct. For example, if you designate your spouse as your beneficiary and later divorce, your former spouse may receive the proceeds from your life insurance policy even if you remarry.  Or you may have purchased a life insurance policy in 1975, naming your now-deceased spouse as primary beneficiary and your brother as contingent beneficiary.  Since that time, you have had three children but have not re-visited the beneficiary designation on that life insurance policy.  Your children will not receive the proceeds from your policy.  You may also need to name a contingent beneficiary so that if your designated beneficiary predeceases you, you can avoid a probate court proceeding.

Have I moved since my documents were executed?

It is important to keep in mind that there are laws in each state that govern how your estate plan documents should be drafted, updated, and executed, which if not followed properly could invalidate your estate planning documents.  When you relocate to a new state, you ought to review your estate planning documents to ensure they are legal in your new state.  In addition, different states have different estate taxes and you may need to revise your documents to account for the different tax structure.

It is very easy to let the years pass and create unintentional inconsistencies within your estate plan.  If you have answered yes to any of the questions above, it may be a good idea to embrace the season and make the necessary changes to your documents.  Then you can relax and enjoy the new year knowing that you successfully crossed off at least one of your resolutions.