Estate planning is the process of developing a strategy for the care and management of your estate if you become incapacitated or upon your death. One commonly known purpose of estate planning is to minimize taxes and costs, including taxes imposed on gifts, estates, generation skipping transfer and probate court costs. However, your plan must also name someone who will make medical and financial decisions for you if you cannot make decisions for yourself. You also need to consider how to leave your property and assets while considering your family’s circumstances and needs.
Since your family’s needs and circumstances are constantly changing, so too must your estate plan. Your plan must be updated when certain life events occur. These include, but are not limited to the following:
It is not uncommon for estate planning to be the last item on the list when a couple is about to be married, whether for the first time or not. On the contrary, marriage is an essential time to update an estate plan. You probably have already thought about updating emergency contacts and adding your spouse to existing insurance policies. There is another important reason to update an estate plan upon marriage. In the event of death, your money and assets may not automatically go to your spouse, especially if you have a previous will designating another beneficiary, children of a prior marriage, a prenuptial agreement, or if your assets are jointly owned with someone else (such as a sibling, parent, or other family member). A comprehensive estate review can ensure you and your new spouse can rest easy.
Birth or adoption of children or grandchildren
When a new baby arrives, everything changes – and so should your estate plan. For example, your trust may not “automatically” include your new child, depending on how it is written. So, it is always a good idea to check and add the new child as a beneficiary. As the children (or grandchildren) grow in age, your estate plan should adjust to ensure assets are distributed in a way that you deem proper. What seems like a good idea when your son or granddaughter is a four-year-old may no longer look like a good idea once their personality has developed and you know them as a 25-year-old college graduate. (Scientific advances, such as DNA testing, may make it unwise to “automatically” include children. See our post on this issue.)
Some state and federal laws may remove a former spouse from an inheritance after the couple splits; however, this is not always the case, and it certainly should not be relied on as the foundation of your plan. (Note: this is generally the case in Texas.) After a divorce, you should immediately update beneficiary designations for all insurance policies and retirement accounts, any powers of attorney, and any existing medical powers of attorney and HIPAA authorizations. It is also a good time to revamp your will and trust to make sure they do what you want (and likely leave out your former spouse). If, for whatever reason, you do want your former spouse to inherit, you will need to make a new will after the divorce becomes final.
The death of a loved one
Sometimes those who are named in your estate plan pass away or become incapacitated. If an appointed guardian of your children dies or becomes incapacitated, it is imperative to designate a new person. Likewise, if your chosen executor, health care proxy or designated power of attorney dies or becomes incapacitated, new ones should be named right away.
Significant change in assets
Whether it is a sudden salary increase, inheritance, or the purchase of a large asset, such scenarios should prompt an adjustment an existing estate plan. The bigger the estate, the more likely there will be issues over the disposition of the assets after you are gone. For this reason, it is best to see what changes, if any, are needed after a significant increase or decrease in your assets.
A move to a new state or country
For most individuals, it is a good idea to obtain a new set of estate planning documents that clearly meet the new state’s legal requirements. Estate planning for Americans living abroad or those who have assets located in numerous countries is even more complicated and requires professional assistance. It is always a good idea to learn what you need to do to completely protect yourself and your family when you move to a new state or country. We are here to help you get fully settled in and build a plan to protect you and your family.
Nielsen Law PLLC provides family focused estate planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information and to learn about our firm, please contact us.