When Should You Revise Your Will or Trust?

undefinedMillions of people pass away every year, but not all of those individuals created or signed the basic documents that help to protect their family and assets. If you’ve already created an estate plan, you’re ahead of the game. The recurring question to consider, however, is when to revisit and modify those documents.

Whether you have a will, a trust, a power of attorney, or a handful of other important estate planning documents created, it’s important to be mindful of which life events constitute the need for revision. Generally speaking, it’s wise to review these documents every five years regardless of outside events. But what happens if a big life event happens, such as a family death, or a divorce, or a birth?

Below are nine life events that could create the need for estate plan modification:

An Increase in Fortune
If you’ve recently started to acquire more money, whether it be from a new job, a promotion, inheritance, investment growth, or a different means that has provided a significant increase in income, you should consider reviewing your estate plan. Estate plans are designed to help distribute your assets once you’re gone. Therefor, if you have more assets than you did before, you should re-examine to ensure your current plan is still right for your situation, and to consider any possible tax consequences of increased fortune.

A Loss of Fortune
Similarly, a dip in your finances can also create the need for estate plan modification or even opportunities. For example, lower asset values combined with a dip in interest rates could reduce the tax cost of lifetime transfers. This could be via intra-family transactions or gift transfers.

Change in Relationship Status
If you’ve recently experienced a change in your relationship status, whether it was via marriage, divorce, or a breakup, and your ex-partner was included in your estate plan, you will want to review your documents, such as your will, living trust, bank accounts, retirement assets, etc.

Preparing for a Divorce
The period of time between when two spouses separate and are legally divorced can be complicated. By law, spouses are entitled to inherit a minimum portion of each other’s assets, and unless that right is waived, it will remain until the divorce is finalized. If you and your spouse are separated and are either in the midst of a divorce, or simply no longer wish to be together but haven’t acquired a divorce yet, it may be wise to revise your will so that your ex does not receive more than the required minimum.

After a Divorce Is Finalized
The period of time after a divorce is finalized is a crucial time to review and revise your estate plan. It’s not uncommon for ex-spouses to pass away without every revising their estate plan, which includes things like an executor, a beneficiary designation, and an executor. If their ex-spouse is still named to inherit or manage assets, it can lead to litigation and serious unintended consequences.

Having a Child
Oftentimes, having a child is what motivates individuals to create estate planning documents for the first time. The most important aspect of an estate plan when you’re a new parent is designating a guardian for your child, and ensuring they’re provided for financially, should anything ever happen to you.

Becoming a Grandparent
If you’re a new grandparent and would like to include your grandchild (or grandchildren) in your estate plan, you’ll want to update your will and any trusts that are part of your plan. You can include instructions on what to do when you pass, or how you would like to help support your grandchild should anything happen to their parents, your children.

Passing of a Spouse
Losing a spouse is a life-altering event that can take years to recover from. Often, revising your estate plan isn’t at the forefront of your mind. However, it’s possible that changes may need to be made soon after your spouse passes away, such as naming a new beneficiary. Doing so can help prevent your heirs from losing income tax benefits associated with these accounts.
Additional documents that may need to be created of revised include a durable power of attorney, and/or a healthcare directive.

Failing Health
When a family member is diagnosed with a terminal illness, it can send families into a season of shock and crisis. While the season of processing and preparing cannot be rushed, some individuals do find comfort in wrapping up loose ends and making sure that their estate plan is updated and relevant to their current situation. This is the time to have your documents reviewed and brought up to date. This is especially important in regard to powers of attorney and health directives, which help assure that you have designated someone else to take care of you and your finances.

If you’ve experienced any of the above life events, don’t wait too long before reviewing your estate plan. While certain events are more time-sensitive than others, it will benefit not only you, but your entire family, to make sure that your estate plan is updated and accurately reflects your current situation. If you have questions about how to revise your estate plan, you can call our office today at (503) 227-0200 to set up a consultation.