According to a survey by Caring.com, only 32% of Americans currently have an estate plan.1 If you’re reading this article, you are likely a part of the responsible minority.
Life, finances, and laws are constantly evolving. This means estate planning decisions regarding your beneficiaries, guardians for minor children, and strategies to mitigate taxes are also subject to change. That’s why it’s recommended that you review and revise your plan every three to five years—or after any major life events—to ensure it still aligns with your family’s needs and goals.
Learn about the importance of keeping your estate plan current and typical conditions where updates are necessary.
Why Update Your Estate Plan?
Reviewing and revising your estate plan can help ensure that your assets will be distributed and managed according to your intentions, your loved ones will be protected, and your wealth will be preserved.
If you don’t keep your plan up to date, you risk creating additional stress and financial challenges for your family in the event of your passing. Key estate planning documents to review include your:
- Last Will and Testament
- Durable Power of Attorney
- Beneficiary Designations
- Advance Healthcare Directives
- Living Will
- Trusts and 529 Plans
To start the process, confirm that the right people are included as beneficiaries and other critical roles, detail any significant gains or losses of assets, and document significant life changes that must be reflected in your plan. This will simplify things when you meet with your estate planning team to officially revise your documents.
Common Reasons to Update Your Estate Plan
There are a variety of circumstances, life events, and external factors that can signify it’s time to update your estate plan. conditions. Some of the most common include:
Marriage or Divorce
If you have recently married or divorced, updating every document with a beneficiary designation is critical to ensure your spouse receives an inheritance. This also includes updating life insurance, bank, brokerage, and retirement accounts such as IRAs or 401Ks. In the case of divorce, you’ll need updates to remove your ex-spouse as a beneficiary.
If you have a domestic partner or common-law spouse you’d like to care for, include this in your estate plan. Otherwise, depending on the law in your home state, they may not be entitled to any of your assets once you pass.
Birth, Adoption, or Death
Welcoming a new child into your family is an exciting time. However, after a birth or adoption, it’s crucial that you update your will promptly and appoint a guardian. If you fail to do so, the courts will decide who takes care of your child when you pass.
You may also want to consider setting up trusts that allow you to distribute an inheritance to new children or grandchildren or create 529 plans to help fund their future education.
If one of your beneficiaries passes, it’s important to adjust your will and update your planning documents accordingly. If an account or policy beneficiary passes away before you do, the asset returns to your estate. This is also the case for anyone in a fiduciary role, such as an executor, power of attorney, healthcare proxy, guardian, or trustee.
Moving to a New State
If you relocate to a new state, you will need to make numerous updates to your estate plan. First, establish an official domicile in your new location to avoid legal or tax consequences.
You should also consult with your estate planning attorney to ensure that your will, advance health care directive, and power of attorney meet the legal requirements for your new jurisdiction. If distance may hinder your fiduciary appointees from effectively performing their duties, you may want to consider changing them.
Twelve states and Washington DC currently impose an estate tax, and six states collect an inheritance tax on beneficiaries.2 If you’re relocating to or from a community property state, it can affect the amount you owe in capital gains taxes.
EverPar can work with your estate planning attorney and accountant to amend your estate plan to align with your new state’s tax and property laws.
Changes in Tax Laws
Failing to update your plan’s strategies to address new tax rules, rates and regulation could result in an unintended and unnecessary tax burden on your estate.
For example, the federal estate, gift, and generation-skipping transfer (GST) tax exemption for 2024 is $13.61 million per individual.3 However, these higher exemptions are scheduled to sunset in 2026 and revert to 2017 levels (adjusted for inflation), which could equate to approximately $7 million for individuals and $14 million for married couples.4
To help address this drastic decrease, your planning team can advise you on strategies such as:
- Upping your lifetime gifting to take advantage of the current exemption rates
- Delaying certain charitable giving until 2026, when deductions will be more impactful
- Setting up spousal lifetime access trusts for yourself and your spouse to preserve both of your maximum combined estate and gift tax exemptions
Is Your Estate Plan Up to Date?
Revising your estate plan provides peace of mind, knowing that your wishes are accurately reflected, your loved ones are protected, and your wealth is preserved for future generations.
EverPar can consider changes in laws and your family’s circumstances, collaborate with your attorneys and tax specialists, and update your estate plan accordingly. If you don’t have a plan, we can help you get started.
Let’s talk about optimizing your estate plan today.
Sources
1 https://www.caring.com/caregivers/estate-planning/wills-survey/
2 https://taxfoundation.org/data/all/state/state-estate-tax-inheritance-tax-2023/
3 https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024
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