Estate plans need to be updated every few years or a significant life event like birth, adoption, death, marriage, divorce, relocation, or the sale of a business or real estate.
Even after years of a global pandemic, about half of all American adults still don’t have a will. A recent report by Caring.com revealed those between 18 and 34 years are more likely to have a will than those in the age 35-54 age group.
If you do have a will or, better yet, a comprehensive estate plan, here are several things to review:
Who is your executor? Do you have the same relationship now as you did years ago when you named your executor? Does the person still live near you and are they still willing to serve in this important role? An executor need not live next door, but if you are in New York and moved to Arizona, some tasks may become more onerous. The executor needs to liquidate accounts, pay final taxes, pay estate taxes, and oversee selling your assets, which could include a home.
Who is the guardian for your minor children? The same relative who would have been a great guardian when your children were four, seven, and ten might not be interested in taking responsibility for three teenagers. Grandparents who adore their grandchildren may not manage the storms of adolescence. Consider who would manage your children right now and make the changes necessary. Before you name a couple as guardians, do you want the survivor as guardian if one spouse dies? Don’t neglect to add a second or even a third name for a guardian to avoid any chance of your children ending up in the foster care system. It does happen due to oversight in estate plans.
Is your Power of Attorney up to date? Suppose your life has become more complicated over the years. In that case, the same Power of Attorney (“POA”) form from ten years ago could land your estate and your heirs into trouble. The standard POA form isn’t the right fit if you have a business that will need to be sold, property in multiple states, or need to plan for a catastrophic illness. A custom drafted POA can help avoid these problems and prevent the need for a guardianship proceeding. A generic POA opens the door to potential issues.
Financial institutions often refuse to accept general POAs, especially if they are outdated. It’s wise to check in with your bank and financial advisor to see if they have their own POA forms. These forms supplement your general POA but only apply to that bank. The bank knows nothing about how your estate plan works. Protect it with a POA suited for your unique situation.
Does your estate plan include trusts? There are as many types of trusts as there are reasons to have a trust, but one thing they all share: they need to be reviewed every few years. Trusts are legal entities used to hold assets on behalf of beneficiaries. A Medicaid Asset Protection Trust is used to protect assets from being countable to qualify for Medicaid. An Irrevocable Trust is often used to remove assets from your taxable estate. It also provides directions on how trust assets can be used and when they should be distributed. A revocable trust can be used during a person’s lifetime while allowing the person to maintain control over the trust.
What kind of trust you need depends upon your situation. This document should be created with your family in mind by an experienced estate planning attorney. Let’s say you established a trust specifically to fund a grandchild’s college education. The child is now eighteen and has decided not to pursue an undergraduate degree. Do you still want them to have access to the funds? Or would you like the funds to go to another grandchild, one headed for a program requiring a post-graduate degree? An estate planning attorney who has seen the various situations that occur will create a trust with some flexibility for the future, or one that can be revised as needed.
Don’t forget beneficiary designations. Suppose your pension plan was created twenty or thirty years ago, and you haven’t looked at it since it was started. In that case, you may be leaving a windfall to an ex-spouse or someone you don’t even know anymore. Review all accounts with beneficiary designations, including pensions and retirement accounts, life insurance policies, investment accounts, Health Savings Accounts (HSAs), and any property titles.
If your estate plan hasn’t been reviewed for three or four years, it’s time for a review. And if it’s been over ten years, make an appointment today to speak with an estate planning attorney. The longer you wait, the more serious the potential consequences for your loved ones.