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How Often Should You Review Your Estate Plan?

Estate Plan Reviews Help to Deal with Life and Legal Changes


How Often Should You Review Your Estate Plan?
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Once you have your estate plan up and running and your assets funded into your Revocable Living Trust, you can't throw your estate planning documents into a drawer and forget about them.  Day in and day out things will happen that will affect your estate plan. Here are some things to consider that may warrant a review of your estate plan and will dictate how often your plan should be updated.

Changes in Your Life

There will be changes in your life that affect your estate plan, such as:

  • Getting married or divorced
  • Having or adopting children
  • Having grandchildren
  • Welcoming a new son-in-law or daughter-in-law into the family (or perhaps not welcoming them)
  • Dealing with the divorce of a child, grandchild or other beneficiary
  • Dealing with the death of a spouse, child, grandchild or other beneficiary
  • Dealing with the incapacity of a spouse, child, grandchild or other beneficiary
  • Inheriting assets from family or friends
  • Selling a business or buying a business
  • Winning the lottery (I know, I wish I had this problem too!)
  • Retiring
  • Buying real estate outside of your home state
  • Acquiring new assets but not putting them into your Revocable Living Trust
  • Moving to a new state

Any one of these life changes will have a direct impact on your estate plan for many reasons, such as by making a current provision invalid or requiring the deletion of an existing provision or insertion of a new provision, or necessitating the creation of an entirely new estate planning document. Aside from this, assets left outside of your Revocable Living Trust may require probate after your death. Once your life has settled down after any of the changes mentioned above occurs, be sure to make an appointment with your estate planning attorney.

Changes in the Law

Aside from life changes, there will be changes in tax and estate planning laws at both the state and federal levels that will affect your estate plan. For instance, in 2001, federal rules were put in place that require every Advance Medical Directive to contain specific language to comply with the Health Insurance Portability and Accountability Act of 1996 (or "HIPAA"). If your estate plan has not been updated since 2001, then your Advance Medical Directive will lack this required language.

In addition, with the phase out of the pick up tax under the Economic Growth and Tax Relief Reconciliation Act ("EGTRRA") in 2005, some states have chosen to revise or enact their own estate tax laws which have created a state estate tax gap. As a result, estate plans for married couples that maximized planning for federal estate taxes through AB Trusts may result in a state estate tax being due and payable after the first spouse dies, and estate plans for singles that only planned for minimizing federal estate taxes may be out of date. If you live in the District of Columbia or one of the handful of states that collects state estate taxes, or you own real estate located in one of these states, and your estate plan was created before 2005 and has not been updated since, then now is the time to have an update meeting with your estate planning attorney.

While the federal estate tax laws are supposedly permanent, at least for now, it is possible that Congress could act to reduce the federal estate tax exemption in the future.  Aside from this, portability of the federal estate tax exemption, which went into effect in 2011, has made the estate plans of many married couples an income tax nightmare waiting to happen.  If your estate plan has not been reviewed and updated in the past few years, then it may not have the flexibility to address the recent changes in federal estate tax laws which could result in unintended estate tax and income tax consequences for your beneficiaries.

Another issue that cannot be overlooked is changes to state laws that will affect your estate plan. For example, in October 2011 Florida enacted a new and comprehensive Power of Attorney statute, so Florida residents, or anyone who owns real estate or a business located in Florida, should have their Power of Attorney reviewed to insure that it will work as anticipated when dealing with Florida property.

Estate Plan Reviews by Your Attorney - Formal Updating and Maintenance Programs

If your estate planning attorney has a formal review program, then be sure to participate in it. That way you will be assured that at least once a year or once every few years your estate plan will be pulled out of the drawer and reviewed for any changes that need to be made.

If your estate planning attorney does not have any type of formal updating and maintenance program, then you will need to make it a point each year or every few years to review your estate plan and how your life changes may have necessitated the need for changes in your plan.  Better yet, find a new estate planning attorney who has a formal updating and maintenance program and sign up for the plan.

The Bottom Line

If you simply allow your estate plan to sit in a drawer, then as the years pass by and the time comes for your estate planning documents to actually be put into action, chances are the documents will not work as expected because they will be stale and out of date with current law, not to mention out of touch with your current family and financial situations.  Therefore, make it a point to review your estate plan on an annual basis or at least every few years to insure that it will still work the way you expect it to work when it's ultimately needed.

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