When Should You Update Your Estate Plan? 6 Signs to Look Out for
Estate planning- doesn’t sound like something fun. However, this is a necessary step everyone should take and make essential changes when a major life incident occurs.
Estate planning requires a lot of steps. It determines the methods to preserve someone’s assets, properties, and financial obligations and how these will be managed after that individual’s death.
As intense as it may sound, these seven signs will let you know when to update your estate plan. But before you do that, you need to understand why an estate plan is necessary.
The Importance of an Estate Plan
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Imagine a car that needs maintenance after a certain period or the depths of your house that need regular cleaning and maintenance. Estate plans are a lot like that- a necessity that needs regular maintenance and updates, and it’s something that everyone should do.
The process of estate planning reveals your assets, obligations, and properties and how you must protect them. With the help of a skilled lawyer, you can make your will and power of attorney, choose your beneficiaries, find ways to reduce taxes imposed on your family, and set up trusts. Your attorney will give you all these documents after finishing the process.
Signs to Update Your Estate Plan
Let’s say you had your estate plan prepared years ago but haven’t updated anything. The following signs will tell you that you should make the necessary updates to your estate plan.
1. Changes in the Law
Legal changes can occur anytime, and you must abide by what the new law states. This means changing your estate plan according to the latest federal and state laws.
One significant change is tax reforms affecting income taxes, tax deductions, and tax brackets. In such cases, you need to revise your taxes to ensure less pressure on your family in the future.
Or you may have some loans, such as business loans, that will take time to resolve. Changes in laws can affect that, too, and may require a thorough revision of your estate plan.
You need to hire a lawyer to stay updated on the legal changes that can affect your estate plan. They will notify you of the modifications and all the courses of action you must follow.
2. Changes in Relationship Dynamics
There is always the possibility of changes in your relationships, whether positive or negative. Maybe you just got married, are heading toward divorce, or your spouse has expired. Changes in your relationship dynamics also call for modifications in your estate plan.
When you get married, your spouse can become a beneficiary to your assets, life insurance, retirement investments, bank accounts, real estate, and other assets. Revising and updating your documents will ensure you’re not leaving your partner with less than they deserve.
And if you’re separating from your spouse, you need to discuss with the lawyer how you can revise your documents and come to a fair conclusion. You may want to exclude them from your financial shares, which calls for updating your estate plans again.
If your spouse has passed away, you need to consult your lawyer to know the required steps to modify your estate plan and resolve any estate litigation. You may need to discuss with your loved ones who the next primary representative should be to take care of the plans in case of your incompetence.
3. Financial Aspects
There are always economic ups and downs that can affect us immensely. Maybe you’re facing financial difficulties and had to sell some of your assets or accumulated liabilities, changing your net worth.
This calls for a revision of your estate planning documents. Your net worth will also affect how your assets, investments, and liabilities will be divided among your family members if you face an unfortunate incident.
You probably started accumulating wealth from assets, putting you in an excellent financial position. This increases your net worth, requiring you to present your lawyer with documents showing your income statements. Your increased net worth means your family will have more outstanding shares.
4. New Members of the Family
The birth of children in your family, whether your children or grandchildren, means that your family size has changed. Even if you had a fully drafted estate plan, you need to revise it again to incorporate the new family members.
After your lawyer appraises all your financial documents, they’ll advise you on how to divide everything among everyone and who your representatives and beneficiaries will be. This will ensure your children and grandchildren are covered and will get a fair share of your assets and other finances.
5. Children Reaching Adulthood
A lot of people prepare their estate plans when their kids are born. And if you’re one of them, you may have included certain conditions in your will. Typical conditions are your kids not getting any of your inheritances before they turn eighteen, earning their own money, or living a financially responsible and independent life.
If they’re soon becoming adults or about to start living independently, it may be time for you to revise your estate plan. Consider how responsible they’ll be with your initial strategy and what you need to change.
6. Deteriorating Health
We never know when a terminal illness will hit us or when we can end up with a degenerative disease. Both instances are wake-up calls that our estate planning needs to be updated. If there was never any, it’s high time to prepare.
Before anything happens to you that can leave you incapable of carrying out your essential duties, identify who is the best fit to be your primary representative and who your beneficiaries are. You’ll need to revise all your taxes, assets, insurance policies, and bank statements to make your last will, and your lawyer will appraise them for you.
Whether you’ve already prepared your estate plan years ago or have yet to make one, these significant life changes require necessary adjustments. With the help of a knowledgeable lawyer, you’ll be able to update your estate plan properly to ensure your assets, accounts, insurance, and all other financial owning are well-protected and appropriately divided.
We hope this article has helped you understand the signs of updating the plan properly.