Your estate plan is not something you should create and just forget about. Life is full of changes, and for your estate plan to be as effective as possible, it should reflect those changes.
It is good practice to review your estate plan with a professional about every three years. However, there are several circumstances that warrant a plan being checked over right away.
You move out of state
Every state has its own estate planning laws. These differences can include the number of witnesses needed for a document to be valid or the minimum amount of an estate that a spouse is required to inherit. Estate taxes can also differ state to state, which may mean a particular estate planning strategy may make sense in some states but not others. To avoid any unanticipated problems, you should have your plan reviewed after moving from one state to another.
Your finances change
Significant changes to your assets or liabilities may also warrant an update to your estate plan. Significant changes may include selling a business, buying a vacation home, winning the lottery or dividing property in a divorce. These changes affect your net worth and the makeup of your estate, so your old plan for distributing your assets may no longer be appropriate. For example, your plan may not specify that you want your house to go to your son and your new vacation home to go to your daughter, or your estate plan may have included a charitable gift that you can no longer afford. For your estate plan to be effective, it must reflect your current financial situation.
Loved ones are born or pass away
When loved ones are born, you may need to update your estate plan to ensure they are included. However, the birth of some loved ones, like grandchildren, can sometimes affect estate plans in other ways too. For example, your daughter’s situation may have changed with the birth of a child. If you selected your daughter to be your personal representative, sometimes called the executor of your will, she may be too busy now to accept that responsibility, and it may be appropriate for you to appoint someone else for that position.
The death of a loved one can also affect your estate plan in multiple ways. You may need to list someone else for a position of responsibility or distribute assets differently among remaining beneficiaries. However, you may also receive an inheritance that changes your financial situation. Because births and deaths can affect estate planning documents in several ways, it is often important to have your plan reviewed after major life events like these.
Although you are on the right track by having an estate plan, the creation of your plan is only the beginning. Life changes can impact the effectiveness of your estate plan, so to make the most of your plan, be sure it always reflects your current situation.