Estate Planning involves a combination of various legal instruments, such as Wills, Trusts, Powers of Attorney, and Living Wills, as well as Lifetime Transfers, Gifts, and Beneficiary Designations.
Keeping Your Estate Plan Current
Congratulations! You went to an attorney and now have a detailed, well-crafted estate plan. Time to put those documents into a safe location and forget about them, right?
As the days, months, and years roll by things happen – you change, your life changes, your assets change, those around you change, and the law changes. All of these changes can affect how well your estate plan will perform when the time comes that it’s needed.
The following is a list of changes that may make it necessary to update your estate plan.
1. You Got Married; You Got Divorced
If you got married…
a range of estate and gift tax planning possibilities have opened for you. You can also make use of forms of ownership to avoid or limit probate, and protect your assets. You may need to look into retirement plans and life insurance policies to make sure your new spouse is the intended beneficiary.
Further, your old estate plan may have become ineffective or compromised. If your old Will made no mention of your spouse, were to you pass, your spouse could elect against your Will and impair your desired dispositive scheme.
Additionally, your new spouse is likely more intimately involved in your life and knows more about your desires and affairs than anyone else. If someone else is your power of attorney or other fiduciary, you should consider updating it to reflect your new partner’s position.
If you got divorced...
you need to go over your estate plan with a fine-toothed comb to ensure your ex-spouse is no longer a beneficiary or fiduciary.
2. You Had a Child
If you have recently had a child (or adopted a child), you should update your estate plan to ensure they will be protected and provided for in case the worst should happen to you. You can designate a guardian for your child and establish a trust to protect and preserve assets until they are of age.
3. Your Child Was a Minor, Is Now an Adult
For many parents with young children, the principal focus of an estate plan is the protection and security of their children. The Will may appoint a guardian and may create testamentary trusts in which the minor’s assets are held until he or she becomes of age. The estate plan may also include college savings.
As your children grow and themselves become adults, many of these provisions become unnecessary and meaningless. After college, your children will settle into the stability of adulthood, and the principal concerns of your estate plan may shift to the preservation of wealth, the enjoyment of resources during your life, and the benefit of future generations (grandchildren).
Additionally, your children may now be suitable candidates for fiduciary positions.
4. Your Child Got Married, Got Divorced, or Had a Child
Besides your spouse, your children are the ones that are most likely to inherit from your estate. As the principal beneficiaries, their life changes will necessarily affect and alter your estate plan. You may welcome a new son or daughter-in-law into your family and wish to include and incorporate them into your plan. Alternatively, you many not welcome them in, and instead need to take special measures to exclude your child’s spouse. Or you may need to ensure that your former son or daughter-in-law is now removed from your plan. Additionally, you may wish to provide for your grandchild’s college savings fund or provide for them in some other way.
5. Your Spouse, Child, Grandchild, or Other Beneficiary Passed
The loss of a beneficiary is a primary reason to revisit an estate plan. The deceased person will need to be removed from your Will. Also, if they are the beneficiaries of non-probate assets such as life insurance policies and retirement accounts, new beneficiaries will need to be designated. If you loss a principal beneficiary of your estate plan (spouse, child, etc.), the dispositive scheme of your assets need to be reconsidered. A widow or widower without children may wish to benefit a close friend, charitable organization, religious institution, or other worthy cause.
6. Your Financial Situation Changed; You’re Retiring
You may have received a large inheritance, gotten a big promotion, purchased your own business, discovered Marcellus Shale under your family camp ground, won the lottery, or received a large settlement from a lawsuit. Or maybe after 30 years of hard work, savings, and smart investments, you find yourself with significantly more assets than when you created your estate plan a decade or two ago. If your estate will exceed, reach, or come close to the surpassing the federal estate tax exemption amount (for 2015, $5,430,000), you will likely need to do some tax planning.
However, your assets do not need to potentially subject to the federal estate tax in order to consider the tax implications of your estate. There is Pennsylvania Inheritance tax to consider, ranging up to 15%. Further, for those estates that may have planned for a lower federal estate tax exemption (in 1995, the exclusion amount was only $600,000), the plan may need to be adjusted to reflect the much higher exclusion amount and address more pressing issues, such as income tax.
7. You Moved to a New State
Moving to a new state is one of the most fundamental reasons to revisit your estate plan. While there are some federal consistencies across state lines (estate tax, income tax, HIPAA), the world of estate planning is primarily governed by the states. They vary about the rules and requirements for wills, trusts, powers of attorney, and living wills. Thus, if you have moved to a different state (or perhaps just purchased property in another state), you need to revisit your estate plan.
8. Your Health Has Changed
Any good estate plan will include a Health-Care Power of Attorney and Living Will. If you were in good health when these documents were drafted, they may, in many regards, simply address generalized beliefs you have about potential end-stage conditions and situations. You were simply guessing about the possibilities of the future. However, if you find yourself dealing with a new illness – diabetes, Alzheimer’s, cancer – you will have a better picture of what the road ahead looks like, and these crucial documents can become better tailored to match your wishes and circumstances.
Additionally, since your Powers of Attorney and Living Wills were drafted, you may have witnessed the loss of someone close to you – a parent, spouse, sibling, or friend. These experiences may have altered or reshaped your beliefs and desires about how you wanted to be treated and what is important to you.
9. Fiduciary Has Died, Is No Longer Around, Isn’t Trusted
In your Will, powers of attorney, and trusts, you appoint various fiduciaries to act on your behalf and carry out your wishes. Those individuals are the people entrusted with implementing the provisions of your documents and fulfilling the goals behind your well-created estate plan. However, over time, these individuals may pass away or suffer from declining health and mental capacity. You and your fiduciary may have grown apart, or they may have moved across country. Or perhaps you have come to realize that the trust you placed in a person was misguided.
Whatever it may be, if you find yourself in a position where you no longer have faith and trust in the ability and willingness of a fiduciary to act on your behalf in fulfillment of your wishes, you need to revise your estate plan.
10. You Heard About a Big Change in the Law; More than 5 Years Have Passed
Perhaps you heard on the news about a change to the federal estate and gift tax, the new power of attorney legislation in Pennsylvania, or the Whitewood ruling declaring the Commonwealth’s ban on same-sex marriages to be unconstitutional. Maybe you are wondering about a change in Medicaid or if your old Power of Attorney needs to be changed because of HIPAA. If you find yourself having questions about your estate plan because of changes in the law, you should consult with an attorney.
But, you shouldn’t simply rely upon what you hear in the news to determine if your plan needs revisiting. With a family, work, a house, social lives, and all your other obligations, keeping up with the changes in the tax code or estate law is far from a priority for most people. It is good ideas to have an estate attorney review your plan every five to seven years. Many attorneys that practice in the field have maintenance programs to keep your plan up-to-date in a cost-effective manner.
Michael J. Girardi
Estate Administration is a process that involves a wide range of duties on behalf of the Executor or Administrator. These responsibilities include collecting, valuing, and protecting the estate’s assets, making payments to creditors and receiving collections from debtors, the payment of various taxes, and the distribution of the assets to the heirs and beneficiaries of the estate.
To learn more about Estate Administration, check out the resources below, or contact us to schedule a free consultation.