It is very important to regularly update your estate plan! We run into situations where there are serious issues with people’s estate plans. Some issues can result in minor inconveniences. Others can create huge problems. An estate plan that was carefully and thoughtfully created over time may have elements that are no longer appropriate. Here are some examples of issues that can occur in an estate plan that may need to be updated and corrected.
Estate Documents are Not Updated After a Divorce
It is a sad time when divorces occur, but they happen. We have seen situations where a person gets divorced and the primary beneficiary on a 401k or IRA is the ex-spouse, and beneficiaries are not updated. A divorce settlement may require sharing part of 401k accounts or IRAs to an ex-spouse. But if the person passes away without updating their primary beneficiaries, then the entire amount in the account may unintentionally move to the ex-spouse. It is important that beneficiaries are regularly reviewed and updated.
Trust Document Cannot be Found
When a trust is created, a final signed copy is usually kept with the Estate Attorney and the client. But we have seen situations where an estate attorney retires, a client moves and no one can find a copy of the living trust. It is very important for people to keep a copy of your estate documents in a safe place, such as in a fireproof safe in your home and maintain a good relationship with an estate attorney.
Accounts Change and are not Updated
Over time, new accounts may be opened, old accounts may be closed and some may move from one financial firm to another. If a person’s financial advisors move from one firm to another, the assets are transferred to the new firm, new accounts are opened and new account numbers are created. Living Trusts often list a person’s assets in Schedule A. It is wise to review the assets in Schedule A on an annual basis and update it as needed.
Estate Law Changes
Estate laws change over time. In the past 20 years, we have seen many estate laws change. For example, the federal estate tax exception has risen considerably. Older trusts often created an A and B trust when a person died. That may no longer be necessary. If it has been a while since your trust was updated, then we recommend you contact your estate attorney for a review.
Moving Between States
Some estate laws are different from state to state. Because of this, we recommend that clients have their estate documents completed by an estate attorney in the state that they are currently residing. So, if you move to a new state, we recommend you find a local estate attorney and have them review your living trust and other estate documents.
Trustee Passes Away or Becomes Impaired
When estate documents are created, an important decision is selecting the trustee for your estate. This is usually someone that you trust who knows your situation well and is in good mental capacity. Over time, that person may develop health issues, become cognitively impaired or even pass away. And sometimes you may find it hard to identify a qualified successor trustee. In that case, a professional trustee might be better. You can get names by asking one of your advisors (tax, estate or financial) and researching them on your own. It is important to review the selection of the trustee for your estate to make sure they are still your best choice.
Review Estate Documents Annually
We believe that reviewing your estate planning documents annually is a wise thing to do. If it has been more than 5 years since you talked with your estate attorney, then you are probably overdue and should do this as soon as you can. A small amount of time spent on this now can save your family and heirs a lot of time and heartbreak later.