Creating a comprehensive estate plan which addresses all of your goals and creates the tools and organizational structure you need is one of the best gifts you can give to yourself and to your loved ones. If you have an estate plan in place, do not make the mistake of failing to review and update that plan on a regular basis. Things change, and when change occurs, your plan should be realigned. Whether it is changes in your family, your goals, your health, your assets or the law, any one of these events might leave your plan out of sync and in need of update. You want a strong plan in the event of your death or incapacity, but you don’t want the wrong plan or a broken plan. In this post, we review good practices for routine review of your plan as well as what factors are most likely to justify a review and update between regular reviews.
How Often Should You Plan a Routine Review of Your Estate Plan?
At Clarity Legal Group, a good number of our clients choose to meet with us to review their estate planning each year. We call this our Legacy Client Program. These annual reviews allow us to both ensure that the plan remains the correct plan, but also allow us to audit the client’s asset ownership and beneficiary designations to ensure they are in sync with the legal documents. We think annual reviews afford exceptional peace of mind for the clients and also allow us to have even more effective conversations with our clients to develop a more complete understanding of the needs and goals.
Most of our clients don’t meet with us every year. We advise existing clients to meet with us for routine estate plan reviews at least every four years. We also conduct annual client educational programs (we will have three such events this week) which update our clients regarding changes in the law and new planning strategies. By attending these events, our clients remain alert as to when factors outside of their own goals, family or personal situation warrant possible plan adjustments. The four year time frame between routine reviews is not set in stone; however, at Clarity Legal Group, our experience is the vast majority of our clients have at least one aspect of their estate plan in need of update at a four year review meeting. As you age, you may find that a more frequent review can enhance your peace of mind, both by refreshing your understanding of plan components and strengthening your relationship with the professionals who will support you and your family over the years.
Regardless when you last reviewed your plan, you should pay particular attention to the following factors that commonly trigger the need to update an estate plan:
- Increase in income – your income will typically increase as you move through your working years. The change in income may trigger a number of changes in your estate plan.
- Change of Employers — a job change will mean that your work related benefits will move, and with that, the need to make sure that applicable beneficiary designations are carried over.
- Purchase of major assets – your asset structure is likely to change as your income and family size increase. The more assets you acquire, the more assets need to be protected in your estate plan.
- Change in beneficiaries – your primary beneficiaries will likely change as you get married, have children, or even experience the loss of older family members.
- Change in fiduciaries –you need to review your choice of fiduciaries each time you review your estate plan. Generally, we think fiduciary designations have a life of about five to seven years. You will want to regularly review whether the people you have selected remain willing to serve or whether they are the best choices.
Life Events that Should Trigger an Immediate Review
While routine reviews are essential to keeping your plan current and functioning as intended, there are also some life events that should trigger a more immediate revision to your estate plan, including:
- Marriage or divorce – your own marriage or divorce will likely trigger the desire to change beneficiary designations within your plan. The marriage of a child is also something that could trigger a review because your son/daughter-in-law could now stand to gain control over the inheritance you plan to leave your child.
- Birth and death of beneficiaries or fiduciaries — basically, the death of anyone who is part of your estate plan, as a beneficiary or fiduciary, is cause to review your plan. The birth of a child or grandchild should also be specifically noted in your plan to ensure your beneficiaries are correctly identified.
- Move out of state — because state laws govern many aspects of your estate plan, moving to a new state should call for a consultation with an estate planning attorney in the new state to determine if any changes to your plan are advisable.
- Retirement – when you retire, a number of important changes will take place, starting with your overall financial picture changing. Those changes warrant a review of your plan. In addition, if you have not yet considered the addition of a Medicaid planning component to your estate plan, now is the time to do so.
- Major change in assets – your estate plan should include provisions that can handle shifting assets; however, a major increase or decrease in the value of your assets, or the acquisition or sale of a major asset (such as your home or business), should give rise to a review of your plan to see how the change impacts your overall plan.
- A significant change in health — even though your plan is designed to prepare for your incapacity or death, a health diagnosis which predicts your incapacity or death is information which might justify changes to the plan.
Contact Durham, Chapel Hill, Raleigh Estate Planning Attorneys
If you have additional questions or concerns about when to update your estate plan, consult with one of our estate planning attorneys by calling us at 919-484-0012 or contact Clarity Legal Group online.
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