Why You Should Update Your Estate Plan

When you execute your estate plan, there is a real sense of accomplishment. Ironically, once one has completed this valuable document. They file it in a safe place and fail to review it for needed updates. Meanwhile, major life events, like a marriage or divorce, birth of a child, sale or purchase of property, winning money, inheriting assets, or starting a business may occur.

Some mistakes which one will miss by not reviewing their estate plan are very costly. One critical mistake that many people make is that they sell their home and forget to put their new home in the trust. This would cause the new home to go through probate to be transferred to the intended beneficiaries. Another problem that we, as your financial advisor, often find during a financial review is the beneficiary designation was not changed when that the heir pre diseased the owner of the plan. Another small correction in designating beneficiaries, can circumvent the possibility of having benefits taken by an ex-spouse (if your child and heir are diseased), which may cut your grandchildren out completely. You can ensure that benefits stay within your family and children, by using the legal term “per stripes” after the name of the heir. In some cases, outdated or inadequate estate plans have led to highly publicized disputes between heirs, causing squandered fortunes and diminished legacies. These situations are more tragic because they are usually entirely preventable. Tragedies seem worse when we know that they were stoppable.

Estate planning can be stressful for family members to discuss. Many times disputes arise, and conversations on the plan may become difficult. A good advisor can help bridge family divide and show the family, through education, how the benefits of clearly defining their trusts and beneficiaries, can result in a more peaceful transfer of assets.

Trusts help to avoid taxation or reduce it. The key of a successful wealth transfer is to treat it as a generational family strategy. Generation stretching may be considered for taxation reductions and to provide continued legacy years ahead.

The reasons that one may not update their plan may be the cost of re-doing an estate plan as well as the difficult decisions one has to make. However, the biggest reason that people fail to update their estate plan is that their advisor failed to bring it to their attention. Some advisors may not have the knowledge of estate planning and may avoid talking to their clients about this.

There are two major times you should review your plan.

When serious life event changes have occurred, such as a divorce, etc. Every few years to make sure you are taking advantage of any changes in tax laws.

Contracts such as Life insurance or annuities do not necessarily have to be in your trust as they have designated beneficiaries, however, the designations should align with designations in the trust. Beneficiary designations should be reviewed often to make sure that your wishes are carried out, and life will be much less complicated for the inheritors.

By Janice Gough