You have invested time and effort to cross all the T’s and dot all the I’s. You have taken the steps to protect your legacy and your beneficiaries. With your estate plan successfully implemented, one final but critical step remains: carrying out a periodic review and update.
Imagine this: since you implemented your estate plan five years ago, you got divorced and remarried, sold your house and bought a boat which you now live on. You sold your legal practice and invested the proceeds. These investments provide you with enough income, so you no longer have to work. And for good measure, you reconciled with your estranged daughter.
This scenario may look more like fantasy than reality but imagine how these or other major changes over a five-year period may affect your estate. And that’s without considering changes in tax laws (income, gift, estate), the stock market, the economic climate, or other external factors. After all, if the only constant is change, it isn’t unreasonable to speculate that your wishes have changed, the advantages you sought have eroded or vanished, or even that new opportunities now exist that could offer a better potential value for your estate. A periodic review can give you more than peace of mind.
Investors with large estates (over the applicable exclusion amount) should review your plan annually or (minimally) at certain life events that are suggested in the following paragraphs. Not a year goes by without significant changes in the tax laws. You need to stay on top of these to target the best results.
Those of you with smaller estates (under the applicable exclusion amount) need only review your plan every five years or following any changes or life events. Your estate may not be affected as significantly by economic factors and changes in the tax laws as a larger estate might be. However, your personal situation is bound to change and reviewing every five years can bring your plan up-to-date with your current situation.
If the value of your estate has changed more than 20 percent over the last two years, you may need to update your estate plan. If you or your spouse changed jobs, you may need to make revisions in your estate plan. Additionally, if there has been a change in your income level or budget requirements, such as a pending or recent retirement.
Many times, changes in family situations can be overlooked. Here are a few examples. You need to review, and may need to update, your plan if: (1) your (or your children’s or grandchildren’s) marital status has changed, (2) a child (or grandchild) has been born or adopted, (3) your spouse, child, or grandchild has died, (4) you or a close family member has become ill or incapacitated, or (5) other individuals (e.g., your parents) have become dependent on you. Many states have a law revoking all or part of your will if you divorce or remarry.
Are you a business owner? A review is in order if you have: (1) formed, purchased, or sold a closely held business, (2) reorganized or liquidated a closely-held business, (3) instituted a pension plan, (4) executed a buy-sell agreement, (5) deferred compensation, or (6) changed employee benefits.
Have there been any major transactions? Be sure to check your plan if you have: (1) received a sizable inheritance, bequest, or similar disposition, (2) made or received substantial gifts, (3) borrowed or lent substantial amounts of money, (4) purchased, leased, or sold material assets or investments, (5) changed residences or domicile, (6) changed significant property ownership, or (7) become involved in a lawsuit.
Have you made any changes in your insurance coverage? These may change your estate planning needs or may make changes necessary. Therefore, inform your estate planning advisor if you make any change to life insurance, health insurance, disability insurance, medical insurance, liability insurance, or beneficiary designations.
Who are the crucial people in your estate plan? If a designated trustee, executor, or guardian dies or changes his or her mind about serving, you need to revise those parts of your estate plan affected (e.g., the trust agreement and your will) to replace that individual.
None of us have a crystal ball. We can’t think of all the conditions that should prompt us to review and revise our estate plans. Use your common sense. Have your feelings about charity changed? Has your son finally become financially responsible? Has your spouse’s health been declining? Are your children through college now? All you need to do is give it a little thought from time to time.
Of course, if you make a change in part of your estate plan with your attorney (e.g., create a trust, execute a codicil, etc.), you should review the estate plan holistically to ensure that it remains cohesive and effective. Keep in touch with your Atlas Advisor and make sure they are aware of your intentions. If you have additional questions, or someone who you care about needs guidance on this topic, please get in touch with us.