Why You Should Keep Your Estate Plan Updated
Everyone needs to have an estate plan to ensure their assets are distributed correctly, and their families are taken care of once they pass on. If you already have an estate plan, whether a will or a few trusts, you’re ahead of the game — but only halfway there.
By there, we mean you’re not done just yet. You see, an estate plan isn’t something you can simply ‘set and forget.’ This is especially true if you don’t have all the necessary documents you need established or have acquired new assets and more.
Essentially, an estate plan requires a bit of maintenance over time. That’s precisely what we’re going to talk about in this article. So, if you want to learn more about estate planning in Huntsville, AL, regarding keeping your documents up to date, then keep reading.
Why You Need to Update Your Estate Plan
Think of it this way: Your life and circumstances will change, likely more than once. Therefore, you need an estate plan that reflects those changes. For example, you may acquire more assets and wealth. You may acquire more children or run into other situations where someone else’s care is in your hands.
Ultimately, you want to ensure that all your assets, your money, and anyone that depends on you are taken care of. Of course, this includes any pets you adopt as well.
Let’s dive into the most common reasons why people must update their estate plans — including their wills and trusts:
You Got Married or Remarried
Marriage is a legally binding contract — one that supersedes love and trust. Therefore, in the event of a new union, it’s common to revise an estate plan to include your spouse and dictate what you want them to inherit.
Alabama, like most states, distributes up to one-half of property and assets to the surviving spouse if no estate plan is in place. (This is referred to as dying intestate, during which the county probate court will follow the Alabama Intestate Succession laws). While the goal is to protect the families left behind, you may or may not have other plans for your assets and your surviving spouse.
In this case, you’ll want to ensure that your estate plan reflects your last wishes for what your spouse will inherit along with any of your biological or legally adopted children. This is especially important if you want to ensure they receive the proceeds and funds from your life insurance policy, bank accounts, retirement accounts, and any other designations that would ensure their financial security.
While you’re at it, you’ll want to review your powers of attorney and health proxy directives. For example, you may want to name your spouse as the person in charge of your health or financial decisions should you become mentally incapacitated, which means you’d have to revoke the old documents and draw up new ones.
You Have New Children
Whether it’s your first child or you’ve legally adopted your new spouse’s children in addition to having your own, children are generally a principal reason to update your estate plan. This is especially true when they’re still minors.
For example, you’ll need to name a guardian for your children in your will in case anything happens to you and your spouse. It’s also a good idea to create trusts for each child to secure their future financial support, which means you’ll also need to appoint a trustee to manage the money or other assets in their trusts until the time comes for the assets to be released.
You can appoint the guardian in question to manage the money and assets. However, it’s often better to create a separate trust for the guardian to finance your children’s care and with someone else managing it. This will ensure that poor financial decisions regarding the money to care for your children are avoided.
When choosing a guardian for your minor children, there’s much to consider. However, it’s not something you want to be left up to the probate court.
You Got Divorced
Any Huntsville attorney will tell you that the state will still follow through with what has been written and made legally official if you don’t update your estate plan after a divorce. Therefore, your ex-spouse may stand to inherit your property or other assets that you may not want them to have — especially if you remarry or make other plans.
It’s essential to update your directives and any transferable accounts, such as your life insurance policy, retirement accounts, savings accounts, etc.
Your Spouse Passed Away
Most married couples leave their property and assets to each other during the early phases of estate planning. However, if you lose your spouse, you’ll need to create an entirely new estate plan. That means a new will, new trusts, new directives, new beneficiary designations — any document that includes them must be freshly drafted to reflect your wishes for health decisions, asset distribution, and so on.
Additionally, if you inherited anything from your spouse after their passing, such as a retirement account, you’ll have to make confident decisions about those inheritances. For example, would you want to roll their retirement account over to yours or have it transferred directly to your bank account? Of course, depending on your spouse’s age, there will be specific stipulations for withdrawing from an inherited retirement account, especially if you leave it in your spouse’s name.
You Bought a Home
If you bought a home or acquired a secondary property, you’ll want to ensure that this critical asset is accounted for in your estate plan. It’s essential to secure your home if you have a family with small children, meaning your Huntsville attorney will advise you to take the proper steps to keep your house out of probate court. This will save your family a lot of time, money, and unnecessary grief — especially if any creditors or other liens try to lay claim on your estate.
A few ways you can go about protecting your home include the following:
A living trust: By putting your home in a revocable living trust, you can maintain legal ownership while also naming a beneficiary to inherit it once you’ve passed on. Once you pass, the ownership will transfer, keeping your home private and protected from probate court and anyone else who may want to try and take it from your estate.
A transfer-on-death deed: Also referred to as a beneficiary deed, a transfer-on-death deed allows you to name someone else to inherit your home at the time of your death. It’s a relatively simple process that also allows you to avoid probate. Of course, if your home is already in a living trust, you won’t need one of these deeds.
Joint tenancy with right of survivorship: You can also choose joint tenancy with the right of survivorship. This means you’ll co-own your home with your spouse or another beneficiary of your choosing, leaving them as the ‘tenant by the entirety’ once you pass on.
Certain Financial Situations Have Changed
If you’ve acquired certain assets since you created your initial estate plan, you’ll need to reevaluate your current plan to see where these new assets fit in. This may mean revising your will or creating new trusts to keep those assets out of probate court.
Adversely, if you’ve acquired significant debts, you’ll want to get in touch with your Huntsville attorney to figure out your best options for reducing your debt’s impact on your loved ones. This could mean finding ways to keep your assets private and protected from creditors and other liens or setting up assets that could be allocated to pay your debts once you pass.
Lastly, you’ll need to think about the needs of your beneficiaries. As their financial situations change, you may want to increase or even decrease the inheritances you had planned for them. This is especially important if one of your beneficiaries is financially irresponsible. In this case, you may want to consider a spendthrift trust.
Chronic Illnesses Run in the Family
If you anticipate a chronic illness because it runs in the family, it’s even more important to make sure certain documents stay up to date to reflect your health care wishes. Of course, your power of attorney (POA) would be the most crucial document.
A POA enables you to appoint a trusted individual to make decisions regarding your healthcare decisions and financial affairs on your behalf should you become mentally incapacitated and unable to do so yourself. Of course, you’ll want to appoint a different POA for each situation, keeping your financial matters separate from your medical matters.
It’s also necessary to update your will to ensure that your wishes for medical treatment and end-of-life care are clear, concise, and as up to date as possible.
How Often Do You Need to Update Your Estate Plan?
The general rule for updating your estate plan is that it should be done every five years after significant life events, such as marriage or children. But, of course, the frequency with which you review and update your estate plan depends entirely on your life circumstances and financial situation.
Many people at least review their estate plan regularly, as often as they review their financial goals. This is usually done annually, semi-annually, or even quarterly. However, this isn’t necessary unless you’re acquiring wealth, real estate, or other significant assets at a more rapid pace.
Your Huntsville attorney can best advise you of when the right time will be to review and update your estate plan.
What Exactly Should Be Updated When the Time Comes
The documents that will need to be revised, created, or dissolved completely will depend entirely on your circumstances. The documents and stipulations that are most commonly updated upon reviewing an estate plan typically include the following:
Healthcare directives
Wills
Revocable living trusts
Executors, trustees, and guardians
Transferable upon death accounts (savings, checking, retirement accounts, and investment accounts)
It’s important to remember that irrevocable living trusts cannot be amended under any circumstances. However, it is common to create new trusts to reflect newly acquired assets, new children, etc.
Yes, You Need an Estate Planning Attorney’s Help
Just like you cannot create an estate plan on your own without an experienced attorney, you also cannot update your estate plan documents without one. So, aside from needing your estate planning documents legally notarized and filed, you’ll need your Huntsville attorney to advise and guide you through your next steps — especially when creating new trusts and updating your POA directives.
We can help you with that. Get in touch with us today to set up a consultation with Sarah S. Shepard or another experienced Huntsville attorney for your estate planning needs. We’ll make sure your estate plan is always in good standing and reflects your most current wishes and more.