If you work with a family lawyer or a financial planner, you probably already know the importance of a regular review of your estate plan. Usually, an annual inspection (or more often, if advised) is a good idea.
But even if you’re not working with a legal or financial professional, you should know that there are three moments that should trigger a review of your estate plan.
If you or your loved one experiences one or more of these moments, it’s time to get the paperwork out and review your plan.
At least six elements should be included in the estate plan. These elements do not need to be in separate documents, but all six of them need to be addressed in order to make clear what should happen to your estate, assets, and any dependent loved ones. These six elements shall include:
- Will (a document outlining how assets should be distributed);
- Power of Attorney (a document that states that you can make legal and financial decisions on your behalf if you become disabled);
- Beneficiary designations (assets, such as registered accounts or policies, such as life insurance, will require you to name a beneficiary — the person(s) who will receive the asset upon death);
- Letter of intent (this is a letter left to your executor, the person responsible for sorting out your estate as soon as you pass);
Healthcare Directive (as a power of attorney, only this document designates the person responsible for making health decisions for you if you become disabled);
Guardianship designations (usually found within a will, a guardianship designation allows you to state who is legally responsible for any dependents under the age of 18).
#1: HEALTH CHANGES
If you or your loved o ne encounters a significant change in health — such as a serious diagnosis or exposure to life-threatening illness such as coronavirus, a diagnosis that would require long-term care, such as dementia or Parkinson’s disease, or an accident that disables you or your loved one — it is time to consider whether your existing estate plan documents still meet your needs.
In your review, make sure that your medical directive is up to date with your current wishes; confirm that your will reflects how you want your estate to be managed and who should benefit from it. At this point, you may not be able to obtain new or updated existing life insurance because it is usually more difficult to obtain this type of insurance when medical issues arise; nevertheless, review your policies to ensure that you have identified the right people as beneficiaries of these policies.
# 2: FINANCIAL CHANGES
Whether it’s a job loss, early retirement or a significant investment loss, say a stock market dive or, on the other hand, a sudden windfall, such as a retirement package or inheritance, a sudden change in finances should prompt a review of your estate plan documents and directives.
Not only do you want to confirm that your wishes still apply if you die, but you also want to check that your new financial situation does not change anything. For example, this new financial situation may put you in a different tax situation. You may also want to explore where investments are held and whether or not it would be advantageous to distribute assets in different accounts or among family members.
# 3: CHANGES TO FAMILY STATUS
Another moment that should prompt a review of the estate plan is when there is a change in the status of the family. These include births, deaths, divorces, marriages, and adoptions. First, consider whether or not your estate plan is flexible enough to accommodate this change of family status.
For example, a new marriage may establish another legal authority to act on your behalf; or your current estate plan may unintentionally disinherit a child or grandchild born after the creation of your current estate plan.
Conversely, due to divorce or death, you may want to change the designations of your beneficiary.
All of these life changes, and others, should be considered as part of your estate planning objectives. Keep in mind that the more complex or intricate the changes, the greater the need for professional assistance.
If you are already working with a professional, consider setting up a meeting to confirm that your wishes and wishes are still being met with your current plan. Even if you’re not working with a professional, make sure you review your will, your life insurance, your health directives, and your financial plan.