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How Often Should I Update My Estate Plan?

January 17, 2023

As your life circumstances change, most likely your post mortem wishes do too —Don’t be caught with an outdated estate plan.

*Editor's Note: This blog has been updated as of January 2023 for accuracy and comprehensiveness.

If you are like most people, it probably took you a long time to get your estate planning documents executed. Unfortunately, getting these executed documents from your attorney in a pristine binder to be kept in your safe deposit box is not the end of your planning. Like any plan, the documents need to be monitored and updated periodically. The general rule of thumb is to have a professional advisor review them every three to five years. This is a good idea if, in the interim, no significant changes have occurred in your life or your assets and liabilities.

What circumstances warrant estate plan updates?

Every year when we prepare tax returns. we find many of our clients have forgotten about their estate plans. We find investments that are improperly titled or beneficiary designations that our outdated. Below are some reasons that may trigger an update to your estate plan:

  1. Changes in federal and state law: In 2018 the estate and gift tax laws changed significantly under the Tax Cuts and Jobs Act. However, many of these favorable changes will expire in 2026, unless Congress extends them. It is important that the documents allow for the most recent legislative changes to avoid unexpected tax consequences. In addition, recent court cases provide new insights and guidance that may either provide new planning opportunities or require potential issues to be addressed.
  2. Family and life changes: A move to another state or country, marriage, divorce, birth, adoption, death., or even a falling out with a beneficiary may require you to revisit your estate plan. Assets passing to unintended beneficiaries can cause significant problems for the rightful heirs and result in high financial and emotional costs to your loved ones.
  3. Changes in personal representatives/trustees/guardians: Oftentimes while your children are young, you may have your siblings and parents fulfill the various fiduciary roles required by your estate plan. When your children reach the age of majority or upon the death of a listed fiduciary, you will need to rethink the people you have named. Changes in the fiduciaries’ lives may also impact their ability or willingness to take on this responsibility.
  4. Changes in Assets: If there is an anticipated event that can substantially increase your assets, there may be planning opportunities to remove some of the appreciation from your estate. Conversely, when market values of assets — such as private business interests or marketable securities — have fallen due to adverse market conditions, you may be able to transfer substantial wealth to loved ones without owing any estate or gift tax.
  5. Changes in Liabilities: If there is a substantial increase in liabilities, you will want to have the plan reviewed by a professional to ensure your assets are protected and you communicate which assets will be used to satisfy the obligations.
  6. IRAs and 401(k)s: If you have significant retirement assets, you may want to consider planning opportunities before you are required to take the required minimum distributions (RMDs). Check out our blog, SECURE 2.0 Raises RMD Age to 73. Beginning January 1, 2023, SECURE 2.0 increases the age for Required Minimum Distributions (RMDs) to 73. The age increases to 75 in 2033.This means you have as late as April 1 of the year following the year you turn 73 to take your first RMD. For each year thereafter, the RMD must be made annually by December 31st.
  7. Health: Note that changes in your or your beneficiaries’ health may require special provisions in your documents.

It is hard to anticipate and address all possible situations that can arise in a lifetime. Proactive and timely planning can minimize unwanted outcomes. Too frequently we see families, coping with grief and hardship, being forced to deal with issues that could have been avoided.

When in doubt ask your trusted advisor if it’s time to review your plan. Contact us today.

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