How often should I update my estate plan?
A good rule of thumb is to review your estate plan every three to five years or sooner, especially if any of the following occur:
1. New children, grandchildren or other heirs: Updating the beneficiaries of your estate plan will ensure that your property is allocated to all your loved ones. The birth of a new child or grandchild is a good time to include them as a beneficiary, name a guardian for them and reevaluate everyone’s intended inheritance.
2. Move to a different state: Laws regarding estate planning vary from state to state. Texas is one of nine states to adhere to “community property” rules, in which any assets and debts acquired during a marriage are considered to be the property of both spouses. In all other states, “common law” rules apply: Assets and debts you acquire during a marriage are yours alone, unless otherwise indicated by a title or legal document. When moving across state lines, it’s important to clarify the ownership of your assets as separate or joint property.
3. Sale or purchase of a major asset: If you own a business or major real estate asset, the selling or purchasing of it can affect the composition of your estate, including how much your beneficiaries receive.
4. Reaching age 70 ½: Over the years, your 401(k), IRA or other retirement plans may represent a large portion of your estate. Upon turning 70 ½, you will be required to take distributions from your retirement accounts, making it a logical time to review these accounts’ designated beneficiaries.
5. A beneficiary passes away: Upon the death of a selected beneficiary, you need to update your estate plan to reflect a new beneficiary or redistribute your property among other beneficiaries.
6. Divorce or remarriage: In the event of a divorce or remarriage, it is important to amend both your estate plans and beneficiary designations, such as on retirement accounts and insurance policies. Establishing guardians for dependents, appointing new powers of attorney and naming new executors are other factors to consider.
7. Substantial change in value: A significant increase or decrease in the value of an asset in your estate can have a major impact on beneficiaries. You’ll need to reevaluate if your assets are still being divided how you desire.
8. Changes in charitable giving: Including a charitable gift to a nonprofit organization, trust or foundation in your estate plan is an easy way to support causes you care about. If you change your mind about the organizations you want to support, reflect that in an updated estate plan.
9. Selected executor or trustee not available: When creating a will or revocable living trust, you may also select a successor executor or trustee. While it is unlikely that a primary executor or trustee predeceases you, it is necessary to review your plan if this happens.
10. Changes in estate and gift tax laws: New state and federal tax laws, such as the 2018 Tax Cuts and Jobs Act, can affect estate and gift taxes, which will in turn affect your estate plan. Be sure to update your plan and charitable gift strategy to take advantage of any new benefits.