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The Importance of Regular Estate Plan Reviews
An estate plan needs to be reviewed on a regular basis to ensure compliance with changing laws, tax regulations and changes in your life and the lives of your loved ones. This is especially true when a major life event occurs happens, often referred to as a trigger event.
What Provisions are Commonly Changed in an Estate Plan Review?
The last five years have seen many changes in tax and estate law. Strategies used in the 1990s may no longer be as advantageous as when they were created. Some methods used to minimize taxes may no longer be needed. Without regular reviews, estate plans can become outdated and ineffective.
Changes to Trusts and Beneficiaries
Few people go through life with the same cadre of friends and colleagues at age 50, as they did during their thirties. For example, close friends when your children were minors and your business was small often change over time. If an estate plan is not reviewed on a regular basis, friends, former partners, or former friends may still have key roles as trustees or executors. If the relationships ended long ago, then an out-of-date estate plan can lead to complications and, in some cases, litigation.
Relationships within the family change as well. If a child marries a person who is not trustworthy, or a child has developed a substance addiction, trusts can be used to control how and when wealth is inherited. Sometimes it is essential to protect the inheritance for and perhaps from a child.
Other Changes Pointing to Review
Financial changes, for better or worse, require a review of an estate plan. The change may be dramatic, like a one-time sale of a business or a windfall inheritance, or something occurring over time, like a steady decrease in personal wealth due to long-term care costs. In either case, the estate plan needs to be reviewed to ensure that it still works. Your financial advisor and accountant are key resources.
How Long Does It Take to Do an Estate Plan Review?
If an estate plan is fairly simple, with a couple owning a primary residence, retirement accounts and having a few adult children, the review process may be straightforward and require only minor updates. However, when there are children from multiple marriages, significant assets or a family owned business, the process may take longer. Like anything else, the actual answer is it depends.
Health Issues and Reviewing an Estate Plan
Receiving a diagnosis of a serious or terminal illness, when death changes from an abstract event to a reality, is the time to review all estate planning documents. Is the advance health care directive, HIPAA Authorization, general durable power of attorney, last will and revocable living trust all ship-shape? Are the right people named to serve as your decision-makers for health and financial matters? This is also the time to speak with family members about their assigned roles and expectations.
There is no legal requirement for estate plans to be reviewed on a regular basis. However, failing to do so can unnecessarily put surviving spouses and family members in demanding situations. Every two years or whenever there is a substantial change in life or in law, an estate plan should be reviewed.
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