Knowing When to Revise Your Estate Planning Strategy

What do Gary Coleman and Dennis Hopper have in common, other than being recently-deceased actors? Each left behind messy estate problems because he didn’t update his plan. It looks like attorneys will receive a nice piece of each estate and of the bank accounts of the contending heirs. You can find details in mainstream media, but one thing is clear. Easy and simple estate planning cadjustments could have prevented these issies.

Estate plans are like the rest of your financial matters. They need to be reviewed and revised on a regular schedule. Change happens all the time, and it’s not only the changes in your life and your family that matter. Factors far removed from your family can trigger a need for your plan to be revised. You might not even know about all the important changes that affect your estate plan. Perhaps a law or circumstance has changed. Your estate planner would know, but you’d have to be in touch with the planner to ensure the appropriate changes are made.

The estate plan is more than a document, such as a will or trust. I’ve stressed in the past that the estate plan is how your legacy is determined and carried forward. Before the documents are drafted, you consider big picture issues such as who should benefit from your estate and how they should benefit. Your estate planning advisors can help with this, but only if you are in touch with them regularly and they know your circumstances and intentions.

Consider these factors that may require a change in your plan.

Life expectancy. Rising life expectancy and changing medical treatments can influence your estate plan. Key elements of a plan are the health care power of attorney and similar documents. As people live longer, these documents are more likely to play a role at some point in their lives. Also, medicine is changing. The way some diseases or conditions are treated is changing, and treatments are available that weren’t in the past. All this could make it desirable to change the details of your medical care documents, especially if you have a family or personal medical history involving a condition for which treatment is changing.

Investment markets. In past visits we’ve discussed how changes in asset values or interest rates can cause big, unintended changes in your estate plan. Some people could receive much larger bequests than you intended and others much smaller ones because of the way these outside forces change the effects of your plan. Some of these unintended effects could be mitigated by putting some flexibility in your plan, but even that has its limits. After significant changes in investment markets, many people simply avoid looking at their account statements. Your estate planner should take a look at them, however, and advise whether your plan needs an adjustment.

Trusts. Many estate plans, even for modest estates, now have one or more trusts. Or you may have considered and rejected including a trust in your plan. What many people don’t realize is that trust law changes, and it definitely changed in recent years. Also, estate planners develop new trust strategies and provisions. In recent years, American trust law has adopted perpetual trusts, trust protectors, directed trusts, the total return trust, and other estate planning strategies. Some states now allow a few provisions of irrevocable, unchangeable trusts to be modified. It’s another reason to meet with your estate planner simply to see if change will improve your plan.

Values. Both people and society change values over time. Things that weren’t important to you a few years ago may be today, or vice versa. Or things society prohibited or frowned upon in estate plans could be acceptable today. Your planner helps your plan reflect the values you hold today.

Tax law. We keep you up to date on estate and income tax changes, and your will should reflect those changes. More changes are on the way and could affect your plan in ways you don’t realize. It’s worth a review every year or so to ensure there aren’t hidden pitfalls in your plan.

More laws. Since estate planning is about more than taxes, laws other than the tax code can trigger changes in your plan. Some people still haven’t modified their plans for the Health Insurance Portability and Accountability Act (HIPAA), which provides your loved ones won’t have access to your medical information or be involved in treatment decisions unless you specifically give them permission. Many states also have amended various laws that affect estate planning.

Fiduciaries. Your estate needs an executor, and your trust needs a trustee ? at least one of each. Changes in your named fiduciaries could mean you need to change your plan. Corporate fiduciaries, such as banks, can merge, move or change their business plans. The person you were working with could retire or move to another firm. Or your fiduciary could be aging or in failing health. Keep track of your fiduciaries and be prepared to make changes.

Personal matters. Of course, your estate plan needs to be revised when there’s been a major change in your family. Changes that need attention include marriages or divorces of you or immediate family members, the death of someone mentioned in the will, and the birth or a child or grandchild.

Some of the changes to make in these situations aren’t always obvious. For example, the birth of a child or grandchild means they should be added to your will or trust. But it also could mean you should make an annual gift up to the exempt amount for the child or grandchild to remove that wealth from your estate.

Changes in your health or financial position also could require a change in your will. Your estate planner also should know when the composition of your financial assets changes, even if the values don’t. For example, the sale of a business or real estate and reinvestment of the proceeds could be important. Moving to another state means a new set of laws controls your estate, so your will needs to be changed.

Sometimes it is best to meet with your planner before a change. Suppose you are planning to sell a major asset. It could be a business, real estate, or part of your portfolio. Your estate planning advisor may be able to develop estate planning strategies to reduce income taxes or estate taxes or both or to structure the deal to make it easier to meet your estate planning goals.

Of course, any changes in your intentions, goals, or values probably should lead to a change in your estate plan.

Important changes to your estate plan can happen without your even realizing it. Schedule a meeting with your planner when there’s been a major change in your life. In addition, you should meet with your estate planner every couple of years at least to see if any changes are required in the plan.