How Often Should I Update My Estate Planning Strategy?
Estate planning strategies for the future are essential, especially when it comes to securing the well-being of your loved ones after you're gone. Your strategy is not a one-time task but a process that should evolve with your and your family's needs. Let's explore why regularly examining your estate strategy and updating it when necessary is key to generational financial well-being.
How Often Should I Update My Estate Planning Strategy?
Many people wonder, "How often should I update my estate planning strategy?" It’s wise to review your estate plan at least every 3-5 years, if not more often, and make updates as needed. We suggest reviewing your estate strategy when you review your entire financial plan, which could be annually, semi-annually, or quarterly.
But, more importantly, you should review your estate strategy whenever you have a major life change. Sometimes a change may be warranted based on your financial situation, but other times, you may just want to update the individuals named in those documents.
Your estate strategy is a comprehensive set of legal documents that outline your wishes regarding your assets, property distribution, healthcare preferences, and more. However, life is unpredictable, and circumstances can change. Without regular updates, your estate strategy may not reflect your current situation or wishes.
Major Life Events That Signal an Estate Strategy Review
While everyone may review their estate strategy regularly at different intervals, certain life events should prompt an immediate review of your estate strategy. Here are some key events to consider:
Marriage or Divorce
When you get married, you'll likely want to update your estate strategy to include your spouse as a beneficiary; second marriages may require additional planning, especially if one or both spouses have children from a prior relationship. Conversely, divorce may necessitate removing an ex-spouse from your strategy.
Birth or Adoption of a Child
Welcoming a new child into your family means updating your strategy to include them as a beneficiary and potentially naming a trustee to help handle the funds until the child becomes an adult. You'll also want to appoint guardians if something were to happen to you and your partner.
Death of a Loved One
The loss of a loved one (or anyone named as a power of attorney, health care representative, or executor/trustee) should prompt a review of your estate strategy to ensure assets are distributed according to your new wishes. If the person is named as executor, guardian, trustee, or power of attorney, you would want to make sure the successor person named in your documents is willing and able to handle those duties and possibly make changes to add other individuals.
Change in Financial Status
Significant changes in your assets, whether through inheritance, investments, or property acquisitions, should trigger a review of your estate strategy.
Relocation to Another State or Country
Laws regarding estates vary by jurisdiction. If you move, it's essential to review your strategy with a local attorney to ensure it complies with local laws and make updates, if necessary.
Changes in Health
If you're diagnosed with a serious illness or experience a decline in health, you should review and update your healthcare directives and powers of attorney.
The question of "How often should I update my estate strategy?" comes down to a balance between regular reviews and responding to major life events. While a general timeline of every 3-5 years may be a reasonable rule of thumb, life changes should always prompt a review of your estate strategy.
In addition to reviewing the legal documents drafted by your attorney, you should also review the beneficiaries listed on your retirement accounts, life insurance policies, and any payable-on-death designations for other bank or investment accounts. Since these accounts name a beneficiary, any changes to your will or revocable trust will not affect how assets are distributed. Therefore, you will want to verify that everything is coordinated and planned to transfer your wealth to others according to your wishes (and potentially minimize any taxes that those beneficiaries would need to pay).
Your strategy should be a reflection of your current circumstances, wishes, and the legal landscape. By staying proactive and updating your estate strategy accordingly, you can ensure that your loved ones are taken care of and your legacy is protected.
While we are not attorneys and cannot provide legal advice, we work closely with attorneys to update the documents and coordinate the beneficiary designations for our clients. If you haven’t reviewed your estate plan in a while, we recommend doing so, and we are always glad to help assist in that process along with everything else that we do.
This content is developed from sources believed to be providing accurate information, and provided by Strategic Financial Planning, Inc. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered legal, investment, or tax advice.