When to Update Estate Planning

Every day we are a day older, and so are all our loved ones, and that means, over time, that our health, finances, expenses, and family relationships change. There is marriage, divorce, children born, parents dying, unexpected health care expenses, job changes, increase or decrease in financial assets, and for very few, even hitting the lottery. No matter who you are, these changes as life goes by can require small or large updates to your estate planning.

Starting with a young married couple without kids, there is not much to do. A power of attorney so each can handle financial matters, and a living will to make health care decisions, and a HIPAA form so the spouse can get medical information is advisable. If that young couple then has children, they need to have wills that state who will have physical custody of the children, and who will control the children’s inheritance in the unlikely event that both parents should die with young children. It is often wise to establish revocable trusts to handle the children’s money until they grow older and wiser.

As those children grow into adults, and move away, and the parents wealth increases (hopefully) and parents get into age brackets where health could decrease, it may be prudent to establish a trust to hold assets for children and grandchildren in the event the parents die. If one elder parent will need long-term care, and the house and lifetime investments are moved into the healthy spouse’s name, that healthy spouse must have a special will that has a trust inside it that will substantially protect the healthy spouse’s assets if she/he dies before the spouse needing care.

If an adult child has a difficult marriage, the parents should strongly consider a revocable trust that could receive assets if the parents pass away. That way funds could be used for the child or the grandchildren and be less likely to factor into a potential divorce. 

Another thing to consider is beneficiary designations or IRA’s, 401Ks, 403 b’s and any tax qualified money. It’s easy to forget that you probably named your spouse as a beneficiary decades ago. Any estate plan update must include a full review of those accounts, to ensure that it still makes sense to leave those assets directly to your spouse, or does it make more sense to leave it to the children. If the spouse cannot have assets, because of the requirements of government programs, the time to change beneficiaries to a trust inside a will could save most of the assets.

Estate planning consists of looking at the family situation and doing worse case scenarios based on what could happen to you and your heirs. Leaving money to your kids is normal. But if they were to pass away before you, you probably want it to go to the grandchildren, if they are old enough to handle money. A twenty-year-old may be smart and frugal, but is just not experienced enough in life to suddenly handle several hundred thousand dollars. Or if a child or grandchild has an unexpected illness, even carefully thought out plans may need to change. 

The important point to remember is that you must make any change while you are still mentally capable, and to anticipate how long your children or grandchildren need the protection of trusts. In short, as we all go through life, changes in age, health, assets and family situation require us to keep our eyes and ears open to what is best for our family, to pass on those assets so they won’t be dissipated or lost.