When to Review Your Estate Plan
Life is full of uncertainties we just can’t predict. Turn back time to the holiday season of 2019, and who could have known all that would transpire as a result of the Covid-19 pandemic? But although life is unpredictable and uncertain, that doesn’t mean your plans should be.
We once had a client who had been divorced for many years. During our annual review of his financial beneficiaries, we noticed that his ex-wife had been listed as the primary beneficiary on an annuity.
Despite our encouragement to update that information, the client kept putting it off – thinking there was no urgency to the situation. This continued for several years, until he suddenly passed away in a car crash. All of the proceeds ended up going to the ex-wife rather than the loved ones he truly wished would have inherited the money.
This is all to say that estate planning isn’t a “set it and forget it” project – rather, it’s an ongoing plan that you should regularly check in on and keep updated. If something were to happen to you, there’s no going back.
That’s why we’re walking you through the seven major life changes that warrant an estate plan review, from marriage to inheritance and everything in between. This information is based on the book, “In Case You Get Hit by a Bus: How to Organize Your Life Now for When You’re Not Around Later,” by Abby Schneiderman and Adam Seifer (founders of Everplans*) with Gene Newman.
7 Life Events That Warrant an Estate Plan Update
Estate planning might not be your idea of a good time, but it’s an important part of planning for your future. Whenever you encounter a major life change, you should set aside time to review your estate plan and make any necessary updates. Here are seven such changes:
Weddings are no walk in the park – between all the craziness of planning and hosting a big event for all your friends and family, finances are likely the last thing on your mind.
But combining two separate financial lives into one is no small potatoes, either. In addition to a will, a few of the things that you’ll want to review and discuss when you get married are:
- Life insurance
- Emergency contact information
- Beneficiaries on health and insurance benefits
- Potential life insurance plans
If you’d like to split your assets between multiple persons, like children and extended family members, it’s even more imperative that you designate your beneficiaries.
On the other side of the coin, divorce is also a major life event that can heavily affect your financial planning. Whether you wish to completely erase your ex from your will or to leave some funds for them in the future, there may be legal stipulations that dictate what exactly you’re allowed to do.
During and after your divorce proceedings, it would be wise to review several estate planning documents, including:
- Beneficiary designations for life insurance and retirement accounts
- Emergency contacts
- Shared passwords
- Power of Attorney
- Health Care Proxies
These issues become even more important (and possibly complicated) if you’re looking to remarry. An attorney and trusted financial advisor should be able to help answer any of your questions.
I once had a client who we discovered still named his ex-wife as a beneficiary on one of his accounts. We reminded him to update it several times but he never got around to it. One day, he died suddenly and sure enough, his executor had to hunt down his surprised ex to inform her of the money she had inherited.
Ah, new babies. They scream, they throw up on you, and they take over your entire life with those adorably chubby cheeks and tiny little fingers.
They also come with a lot of paperwork. Between birth certificates and social security cards, you may be tempted to swear off all documents for anything ever again. But actually, there are probably some important things you still need to fill out some forms for, such as:
- Appointing a legal guardian in the event that you pass away
- Updating your beneficiaries
As your family grows through more children, stepchildren, or even adopted children, you’ll need to revisit these items again.
It’s also worth your while to periodically assess your plans as your children grow older to make sure everything is distributed appropriately – nobody wants a sibling war at your funeral.
Unfortunately, sometimes life comes to an unexpected early end. Some of the people you’ve named as your beneficiaries, executor or Health Care Proxy might pass on before you do.
Likewise, if the person you’ve appointed as legal guardian of your children isn’t around anymore, you’ll want to put a plan in place to ensure they’re still taken care of in your absence.
In the event that someone named in your estate plan passes away before you do, make sure to update the necessary documents and make those changes as soon as possible.
5. Health Complications
It’s not fun to think about, but if you or your spouse receives a tough diagnosis, you’ll want to make sure everything’s in place before you become mentally or physically incapable of doing so.
A good place to start is with an Advanced Directive, also known as a living will, dictates what you want to happen health-wise if you’re no longer able to make those decisions down the road.
6. New Laws and Regulations
This one is more for the pros than for you, but it’s still important to keep it on your radar.
If there are any major laws or regulations changes that could affect your estate plan, you’ll need to get in touch with your financial advisor or estate attorney.
For example, if a health directive from a previous state of residency will no longer be accepted in your new home state, you’ll need to create a new one.
Sometimes extra money unexpectedly comes your way, whether that’s through an inheritance, a salary bump, or even a lucky lottery ticket.
In these instances, you’ll need to review your financial plans (or create a new one altogether). Pricey assets and big bank accounts are worth protecting, and without a plan in place, you risk your family members fighting over your assets once you’re gone.
A proper estate plan is one that changes and grows with you over time, riding out life’s biggest moments and setting your loved ones up for a secure future.
While we suggest you review your estate plan at least annually, these seven big events definitely warrant a phone call to your financial advisor and an extra close look at the plans you have in place.
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