3 Tips for Reviewing Your Estate Plan

Having an estate plan ensures that your assets are distributed according to your wishes after passing, minimizing potential conflicts among your beneficiaries. Equally important is the need to regularly review and update your estate plan. Life and your financial circumstances, family dynamics, and legal regulations are ever-changing. Keeping your estate plan current ensures it aligns with your present situation and reflects your evolving goals. This proactive approach safeguards your legacy and provides peace of mind, knowing that your financial affairs are in order and your loved ones are well taken care of when the time comes.

When is the time to come to review your estate plan? A good rule of thumb is to check it whenever you go through major life changes. These include selling your home or business, going through a divorce, remarrying, or the death of a spouse.

1. Regularly Scheduled Reviews

Life doesn’t stand still, and neither should your estate plan. By setting predefined intervals for reviews, like every 3-5 years, or tying them to major life events such as marriage, divorce, or the birth of a child, you ensure that your estate plan periodically evolves with your life.

2. Adapting to Financial Changes

Your financial situation isn’t static; it evolves with time, influenced by various factors. To secure the future of your loved ones effectively, your estate plan must remain adaptable and reflect your current financial standing. Here’s why:

Accounting for Evolving Assets and Liabilities

Your assets, including real estate, investments, and business ventures, play a pivotal role in your estate plan. Conversely, liabilities such as mortgages and debts must also be considered. The key is maintaining a balance that ensures your beneficiaries are well-provided while not burdening them with financial obligations.

The Impact on Your Estate Plan

Changes in your assets and liabilities can significantly impact the value of your estate. For instance, an increase in real estate holdings or a successful investment may substantially grow your estate’s worth. Conversely, accruing debts or encountering business setbacks might alter your financial picture. These fluctuations underscore the importance of periodic reviews to ensure that your estate plan remains in sync with your current financial reality.

3. Shifting Tides of Family Dynamics

Family dynamics are like a constantly changing river, winding its way through life. To ensure your estate plan remains a steadfast vessel for your loved ones, it’s essential to recognize and adapt to the evolving family landscape. Here’s a closer look at how these dynamics can shift and how to navigate them within your estate plan:

Evolution of Family Relationships

Over time, family relationships can take unexpected turns. Marriages may strengthen bonds, while divorces can create new dynamics. Births and adoptions introduce new members, and estrangements can create distance. Acknowledging these changes is the first step in adapting your estate plan effectively.

Scenarios Impacting Your Plan

Consider various scenarios that can reshape family dynamics:

• Marriages: A child getting married may lead to a shift in beneficiaries and asset distribution.
• Divorces: If a beneficiary goes through a divorce, you may want to protect their inheritance.
• Births or Adoptions: Welcoming a new family member may require changes to guardianship arrangements, college funds, and inheritance plans.
• Estrangements: In cases of estrangement, you may decide to adjust your estate plan to reflect changed relationships or remove beneficiaries.

Addressing Changes in Your Plan

Your estate plan should reflect these shifts when family dynamics change to remain relevant and effective. Here’s how to address them:

• Updating Beneficiaries: Ensure your beneficiaries accurately reflect your current wishes, considering new family members or relationship changes.
• Guardianship Arrangements: Review and, if necessary, revise your chosen guardians for minor children or dependents.
• Distribution of Assets: Make sure your assets are distributed in a way that aligns with your evolving family dynamics and your desired legacy.

Guidance for Adjustments

To navigate these changes effectively, you need a strategic approach. Regularly consult with your financial professional to assess the impact of these financial shifts. They can guide you in making necessary adjustments, whether it involves updating beneficiaries, revising distribution plans, or optimizing your estate’s tax efficiency.

Essentially, your estate plan is only as effective as its alignment with your financial situation. By staying vigilant and adapting to these changes, you can ensure that your beneficiaries are well-provided for, regardless of the fluctuations in your assets and liabilities.

Estate Planning Review Checklist

Inventory

Begin by taking inventory of all your valuable possessions vs. what you have documented already in your current estate plan. Maintaining a comprehensive list of assets is important to ensure nothing is overlooked. Be sure to include both tangible and intangible assets.

Tangible assets encompass:

• Vehicles
• Furniture
• Jewelry
• Homes
• Any other physical items of significant value
• Illiquid Assets owned

Intangible assets include:

• Bank accounts
• Retirement accounts, such as 401(k)s or IRAs
• Life insurance plans
• Financial instruments like bonds or annuities
• Any other nonphysical assets of value

This includes mortgages, lines of credit, and any other outstanding debts. Some debts continue to have obligations even after one’s passing, and they may impact your estate. By accounting for your intangible assets and liabilities, you ensure that your estate plan covers all aspects of your financial life, providing clarity and security for you and your loved ones.

Identifying and Adjust Your Family Members

This step ensures that the needs of your immediate family and dependents are considered. Your will and life insurance policies play a large role in addressing the requirements of your surviving spouse and making guardianship and beneficiary designations for children and other dependents.

Many individuals also make arrangements to care for their beloved pets to ensure their well-being.

Review and Update Directives

Living wills, powers of attorney, and trusts offer a structured approach to navigating illness and end-of-life matters. By proactively selecting which tools to include in your life plan and how to configure them, you ensure you’re prepared for various scenarios. It’s important to have open conversations with individuals you’re considering naming as agents in these directives, ensuring their willingness to act if needed. Additionally, consider designating secondary agents in case your primary choice becomes unavailable when the directive comes into effect. This foresight allows you to craft a robust and adaptable estate plan that aligns.

Assessing Beneficiaries and Backups

Ensure the smooth transition of your assets by designating beneficiaries for your accounts and assets. You may have already chosen your beneficiaries, but it is worth considering options. A beneficiary is an individual or institution who can inherit a portion of your estate, whether it’s money, physical property, or a stake in a business. Here’s what you need to do:

Primary Beneficiaries: Name primary beneficiaries for your bank accounts, retirement accounts, and life insurance policies. Ensure that the names on these accounts align with your other person and wishes to avoid any potential confusion.

Backup Beneficiaries: As a precaution, select backup beneficiaries for your assets if your primary choice is unavailable or passes away before the estate distribution. This step adds an extra layer of security to transfer assets under your plan.

Residuary Clause: Consider including a “residuary” clause in your will. This clause designates a beneficiary who will inherit any remaining assets after the primary distribution. It ensures that nothing goes to waste or remains unaccounted for.

Helpful Hint: Take this opportunity to review the living trust will and update the named beneficiaries on all your accounts. For instance, if you’ve remarried and your first spouse is still listed as a beneficiary on a bank account, making the necessary changes to reflect your current spouse is essential. This proactive step can prevent potential conflicts in the future and align your estate plan with your current life circumstances.

Research Updates to State Laws

Staying on top of evolving state laws and legal documents is central to effective estate planning. Researching state law updates can seem daunting, but it’s a vital endeavor that directly impacts your estate plan’s success.

As the laws evolve, they present new opportunities and challenges. Being well-informed lets you capitalize on these opportunities, ensuring your assets are distributed according to your wishes. It’s also a powerful tool for preventing potential disputes and unnecessary taxes that may erode your legacy.

Consider partnering with a seasoned estate planning attorney or financial and tax planning advisor here. They are well-versed in the latest legal developments and can tailor your estate plan to maximize its benefits in your jurisdiction. Working collaboratively, you can design a plan that safeguards your assets, minimizes tax liabilities, and supports your loved ones’ financial well-being.

Estate and Inheritance Taxes

A best practice with taxes is continually researching updates to state and federal tax laws. These laws often change, and by staying up to date, you can optimize your estate plan to minimize the tax burden on your heirs and beneficiaries. Keeping an eye on these tax regulations ensures that your assets are protected and passed on as efficiently as possible. Remember, knowledge is your most valuable asset in preserving your legacy and financial well-being.

Take Note of Changes and Updates

When you review your estate plan every 3-5 years, keep track of any modifications, additions, or removals. Maintaining detailed notes about these changes will simplify future assessments and smooth the process. Additionally, thorough notes will remind you of your decisions during the previous revision. This proactive approach ensures your estate plan remains up to date and aligns with your intentions.

Estate Planning Documents

Regularly reviewing your estate plan is critical in securing your legacy and providing for your loved ones. Life is dynamic, and financial, family and legal landscapes change over time. By embracing a proactive approach, you can ensure that your estate plan remains a steadfast vessel for your intentions.

Incorporating these practices into your estate planning routine will grant you peace of mind, safeguard your legacy, and provide for your loved ones as you intend. Remember, your estate plan is a living document that should evolve with your life, ensuring that it remains effective, efficient, and reflective of your current circumstances.

Have any estate planning questions? One of our financial advisors can help. Request a complimentary, no-obligation appointment with one of our financial advisors.