Your New Year’s Resolution: Review Your Estate Plan

Trying to lose those holiday pounds? Resolved to exercise for an hour a day? New diet making you grumpy? We’re already a few weeks into the year, and most of us made aspirational New Year’s Resolutions that, while admirable, will fall completely off our radar by Valentine’s Day.

If you’re in need of a resolution that’s reasonably attainable, we have a recommendation for you: review your estate plan.

Creating a good estate plan is not necessarily a one-time task. In fact, it rarely is. Rather, estate planning is an ongoing process, and even the best estate plans may need to be updated or adapted over time.

In this first post of 2022, we’ll give you some practical advice about when to review your estate plan and what you can do to make sure your plan remains practical, effective, and current.

When to Review Your Estate Plan

There are milestones in everyone’s life that might affect the provisions they have made in their estate plans. The following are a few categories of those events that you should look for in your own life.

Change in Marital Status

Getting married or divorced can have major implications for your estate plan. If you have recently married or are planning to do so in the near future, you should consider whether you need to amend your existing will or get one in place to avoid the default intestacy scheme.

This is especially true if you are entering your second (or subsequent) marriage. Many individuals entering their second marriage prefer that children from their first marriage serve as their fiduciary, such as their agent under a Power of Attorney or health care surrogate. Others want to make clear that their spouse should receive their entire estate at death, rather than the default scheme provided by Florida’s intestacy statutes.

On the other hand, if you are recently divorced, it is important to review your plan to ensure that your former spouse is no longer in your Will (or that they remain in your Will, depending on your wishes and individual circumstances). If your former spouse serves as your agent under a Power of Attorney or Designation of Health Care Surrogate, you will want to make sure that those documents are no longer in effect or, if you want your former spouse to continue in those roles, ensure that they remain in effect.

It is not wholly uncommon for spouses to get divorced in the course of planning for public or needs-based benefits. If you are divorced or are planning to get “civilly divorced,” but intend to continue to live with your former spouse as though you were married, you should be sure to have your estate planning documents reviewed by a knowledgable attorney to ensure that your former spouse remains a beneficiary of your estate plan.

When a Beneficiary Becomes Incapacitated

It is a good idea to review your estate plan when your spouse, child, or other beneficiary becomes incapacitated. Clients often want their estate to provide for loved ones who are incapacitated or have special needs. A well-conceived estate plan can help provide extra care for these individuals while preserving any public benefits they may be receiving at the time of your death.  This may include creating a trust for the benefit of a beneficiary who is incapacitated.

When a Beneficiary Dies

No one wants to see their loved ones pass before them. However, it is important that you review your estate plan when a beneficiary predeceases you. You’ll want to pay close attention to what assets that beneficiary was slated to receive and confirm what will happen to those assets under your current estate plan, such as whether any contingent beneficiaries exist.

When a Beneficiary Reaches the Age of Majority

Reviewing your estate plan when you or your beneficiaries pass major milestones is a good habit to get into. One such milestone might be when a beneficiary under your estate plan reaches the age of majority. It is a common practice amongst estate planners to leave assets designated for minors in a trust or other custodial arrangement to ensure that minor’s inheritance is best conserved.

One consequence of this standard practice is that the funds are oftentimes given outright to the beneficiary if the beneficiary is over the age of 18 or 25. If your minor beneficiary has reached one of those ages and you believe they are not yet able to handle money on their own, you may consider revisiting your estate plan to keep those assets in trust for a longer period of time.

When the Nature or Value of Your Estate Changes

Though estate plans are generally written to be fairly flexible in their distribution schemes, significant consideration is given to the nature and scope of the assets the client has on hand at the time the documents were drafted. Therefore, it is important to review your estate plan when the value of your assets increases or decreases significantly, or if there have been changes in how you hold title to individual assets.

If your assets have significantly increased in value, you may want to increase your number of beneficiaries, or provide greater protections to safeguard the assets in your estate to benefit generations to come. Conversely, if your assets have diminished since you drafted your estate plan, many of the asset protection mechanisms commonly built into estate plans may be no longer necessary.

When a Fiduciary Dies or Becomes Incapacitated

Most people associate the concept of estate planning with determining what happens with your assets when you die. However, a complete estate plan also includes planning for your own incapacity. When you are unable to make decisions on your own, the agent under your power of attorney or your designated health care surrogate can make those decisions on your behalf. The influence that these individuals can wield over your assets—or even your life—is why the selection of your fiduciaries (power of attorney, health care surrogate, pre-need guardian, personal representative, trustee, etc.) is one of the most critical decisions you will make when you plan your estate.

Unfortunately, deciding who will serve as their fiduciary is a decision some individuals have to make multiple times. It is critical that you revisit your estate plan if your fiduciary dies or becomes incapacitated, especially if your documents do not name a successor in that role. If your documents do name a successor, you should evaluate whether you would like that individual to continue as your primary agent, whether you should replace them, or whether you should name a co-fiduciary. In either case, it may be advisable to make your wishes clear by executing new documents with updated designations.

When You Move to a Different State

Though it seems counterintuitive at times, different states have different ideas of the duties and powers that fiduciaries should have and in how estates should be managed. Intestate succession, homestead protections, the calculation of an elective share and marital assets, the management of trusts, and the powers of an attorney-in-fact are all examples of differences in the law from state to state.

Naturally, due to these variations in the law, estate plans are generally written to be specific to the state in which they are drafted in. If you have moved since preparing your estate plan, it’s probably time to review and execute new documents in accordance with the laws of the state where you live. At the very least, you should consult an attorney to determine whether your existing estate plan will be recognized in your new home.

With the Passage of Time

All of our previous recommendations of when you should review your estate plan centered around the occurrence of a specific occasion in your life: a milestone birthday, a marriage, a divorce, or a death. However, there might be long stretches of time in your life where none of these key events take place.

If this the case for you, you should certainly relish in the sense of stability you’re likely feeling. But that does not mean you should let your guard down. With the passing of time comes the passing of new laws and policies. Many of these changes are small and inconsequential, but some may affect you, your assets, or your estate plan—and without you knowing it. For that reason alone, we recommend that you review your estate planning documents regularly, at least every few years, but ideally, annually. Diligently reviewing your plan can help ensure that it meets your needs in a world that is evolving and ever more complex.

Our Recommendations to You

Crafting an estate plan can be complicated and frustrating, but it’s nothing like the frustration that you or your family will feel if you fail to do so. To ease that process and prevent some of that frustration down the road, we recommend everyone follow the following three steps to keeping an estate plan practical and current.

1. Be Consistent in Reflecting on Your Estate Plan

Estate planning is an ongoing process. Though your documents may not actually need to be changed often, your assets ebb and flow in small ways every single day. Sometimes, such as during the occurrences described above, that ebb and flow is interrupted just enough to warrant revisiting your plan.

For these reasons, you should regularly reflect on your estate plan, including your fiduciary designations. Consider setting a date to review your plans each year and, when that date rolls around, reflect on whether there have been any significant changes in your life, your health, your assets, or your beneficiaries. Pay particular attention to the events outlined above. There’s a good chance that, in the stress of the moment, you forgot to consider how that event would affect your estate plan.

Setting a date every year to reflect on your estate plan can help you ensure your plan is applicable and up-to-date.

2. Don’t Forget Beneficiary Designations

You have worked with an attorney to design an estate plan. Your plan lays out not only what should happen to your assets at death, but makes contingencies for your own incapacity and that of your beneficiaries. Your fiduciaries have been selected and briefed in their new duties and powers, and everyone involved is understanding and supportive of your plans. You’ve sat in your attorney’s conference room and signed your name what seemed like dozens of times, and initialed even more. You’ve done the work and your estate planning is finished. Right? Not quite.

One incredibly important thing to keep in mind is that some assets are not necessarily controlled by your Will or Trust. Many assets have designated beneficiaries that you selected when you first obtained them. Bank accounts, insurance policies, annuities, retirement accounts, pension plans, digital assets, and even real estate can have beneficiary designations that supersede anything written in your Will, even if you make a specific provision for those assets. Thus, it’s important to review each of your assets, determine which ones have designated beneficiaries, and ensure that those beneficiaries are identified in a way that fits the general scheme of your estate plan.

3. Consult a Certified Elder Law Attorney

When the time comes to review, revise, or begin your estate plan, be sure to consult a Certified Elder Law Attorney. Any attorney can produce an estate plan, but Certified Elder Law Attorneys in our firm  have the knowledge and experience necessary to craft a plan that looks beyond your death and considers incapacity, public benefits planning, special needs beneficiaries, and more.