How to Know When to Update Your Estate Plan
Takeaways
- Your estate plan should be updated regularly, particularly after major life events (e.g., marriage, divorce, birth of a child, death of a loved one), significant financial changes (e.g., increase or decrease in wealth, real estate transactions), or other notable shifts (e.g., moving states, changes in tax laws, health changes).
- Regular reviews, even without specific triggers, are recommended every three to five years to ensure your estate plan remains current and effectively reflects your wishes, protecting your legacy and providing security for your beneficiaries.
Creating an estate plan is one of the most important steps a person can take to provide for their loved ones and ensure their wishes are carried out. But drafting a will, trust, or related documents is not a “one-and-done” event. Life changes, and so should your estate plan.
Updating your estate plan regularly helps ensure that your assets are distributed as you intend, your beneficiaries are properly provided for, and your chosen decision-makers are still able and willing to serve. Below are some of the most common scenarios that should prompt you to review and update your estate plan.
Major Life Events
Marriage
When you marry, your legal and financial life changes significantly. You may want to add your spouse as a beneficiary, update your will to reflect their inheritance, and name them in key roles such as health care proxy or financial agent. In community property states, marriage can also affect ownership of property, which makes updating your estate plan even more important.
Divorce
Divorce is a major reason to revise your estate plan. Many people no longer want their former spouse to be a beneficiary or to serve as an executor, a trustee, or an agent. Updating your estate plan documents ensures your assets go to the people you now choose, not to an ex-spouse by default. Similarly, reappointing decision-makers, such as executors, trustees, and agents, will increase the chance that your wishes will be carried out.
Remarriage
A second marriage introduces additional considerations. You may want to provide for your new spouse while also protecting assets for children from a previous relationship. Updating your plan can help prevent disputes and balance competing family interests.
Estrangement
You may have become estranged from a child, sibling, or another close relative. If relationships with family members change, you may wish to revise beneficiary designations or fiduciary roles to reflect your current wishes.
Birth or Adoption of a Child or Grandchild
Adding new family members is a joyful reason to revisit your estate plan. Parents and grandparents often want to update wills, trusts, or guardianship designations to include newly born or adopted children. Without these updates, children or grandchildren could be unintentionally left out.
Death of a Spouse, Child, Beneficiary, or Trusted Decision-Maker
If a loved one passes away, your estate plan may need significant revisions. A deceased spouse or child may require redistribution of your assets, while the death of an executor, a trustee, or a guardian may mean appointing someone new.
Similarly, if a person becomes disabled or develops a chronic illness, they may lose the ability to act on another’s behalf. In addition, they may need special arrangements regarding their inheritance if they start receiving government benefits.
Financial Changes
Increase in Wealth
A sudden increase in wealth, such as from an inheritance, legal settlement, or the sale of a business, may create new tax and planning considerations. Updating your estate plan can help you manage this wealth efficiently and protect it for future generations.
Decrease in Wealth
If your financial situation changes and your estate is smaller than when you first planned it, your documents should reflect these new realities. Specific gifts may need to be adjusted so they remain fair and achievable.
Purchase or Sale of Real Estate
Real estate is often the largest asset in an estate. Buying a new home or investment property, or selling property you previously planned to pass on, should trigger an update to your will or trust. This ensures property is titled correctly and aligns with your estate goals.
Other Reasons to Update Your Estate Plan
In addition to major life events and financial changes, there are other reasons to update your estate plan, including:
- Moving to another state. Estate planning laws vary from state to state. If you move, updating your plan ensures it remains valid under your new state’s laws.
- Change in tax laws. Updates to estate or gift tax laws may affect how you want to structure your estate to minimize taxes.
- Health changes. A new diagnosis or change in your medical situation may prompt you to revisit health care directives, living wills, or powers of attorney.
- Change in relationships. Beyond estrangement, positive changes, such as reconciling with a loved one, can also prompt updates.
- Aging executors or trustees. If your chosen decision-makers are getting older or are no longer capable of serving, you’ll want to designate successors.
Regular Reviews of Your Estate Plan
Even if none of the above events occur, experts generally recommend reviewing your estate plan every three to five years. Regular check-ins ensure that your documents keep pace with your life, your finances, and applicable laws.
Bottom Line
Your estate plan is a living document, meant to evolve alongside your life. Whether you’re experiencing major milestones like marriage or adoption, navigating changes in wealth, or simply recognizing that your chosen executor can no longer serve, updating your plan ensures your wishes are carried out smoothly.
Failing to update your estate plan can create confusion, disputes, and unintended consequences. By revisiting it at key life junctures, or on a regular schedule, you can protect your legacy and provide clarity and security for the people in your life.
For additional reading on topics related to estate planning, check out the following articles:
Takeaways