The Importance of Updating Your Estate Plan

What steps should I take to update my estate plan?

Creating an estate plan is only the first part of the estate planning process.  It clarifies your wishes and provides for those you love. However, because your life and the lives of those around you are constantly evolving, we recommend that you review your estate plan at least every five years. Circumstances that may require you to alter your original estate plan include: marriages, divorces, births, illnesses, deaths, and buying or selling of real estate or businesses. There may also be more subtle changes in relationship or status that influence your decisions about how you want to distribute your assets.

What should you consider when reviewing your estate plan?

There are several things to take into consideration when you look over your existing estate plan. These include

  • Has the value of your assets changed considerably?
  • Have you moved to a different state or purchased real estate in another state?
  • Are there any new health issues for you or your family? Have any special needs arisen?
  • Are your named fiduciaries, such as trustees or health care agents, still appropriate choices?

Which documents should you review?

While you’re reviewing your overall estate plan, it is a good idea to review your existing estate planning documents as well.  The documents that you should review include: your will, power of attorney, living will, healthcare proxy, and trust. Because life events may alter your views, it is important to have your latest wishes reflected in your estate planning documents.

Don’t Overlook Your Insurance Coverage

Life insurance is one way to pass income tax-free assets to your heirs. It may also be a critical aspect of sustaining family members who depend on your income. As you review your life insurance, it is critical to take note of any changes in the circumstances of your beneficiaries. Have they married, divorced, had a child, become independent, lost a job, become ill, retired? These factors may affect how much life insurance you should be maintaining.  Because life insurance proceeds are taxable for estate tax purposes, you should also discuss with your lawyer whether or not an irrevocable life insurance trust is advisable.  An ILIT is a strategy to avoid taxes on insurance proceeds.

Minimizing Your Taxes

It is usually wise to incorporate a trust into your estate plan to reduce exposure to federal or state estate tax.  A trust will also make managing your assets much easier if you become incapacitated and save your heirs the complications and expenses of probate after your death.

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