When someone dies without having updated their estate plan for many years, the executors often face a difficult task of administering a disorganized and incomplete estate. At best, the executor needs additional time and resources to organize the estate. At worst, says a recent article titled “Estate plans require maintenance” from The Record-Courier, the decedent’s wishes and desired distributions are not followed.
Among several reasons for updating an estate plan are major life events, known as “trigger” events. These include marriage, birth, death, divorce or changed financial circumstances.
The same is true for the death of a beneficiary or changed personal relationships.
If the grantor becomes incapacitated, changes in the estate plan may become necessary if the person needs long-term care or will be receiving any kind of means-tested government benefits.
A revision of the estate plan is warranted if there is a change in one’s assets, from purchasing a new home or business, selling real property or the modification of a business venture. A growing estate may require a revised plan focused on minimizing estate tax liabilities. On the other hand, if the size of the estate has decreased significantly, an estate plan focused on tax planning may need to be revised or simplified.
Most businesses require a succession plan and the designation of a person to take control of the business upon the death of the grantor.
Finally, as assets within the estate change, the property list, often referred to as the “schedule,” should be updated. All newly acquired assets need to be titled properly, especially if the plan is for them to be owned by a trust.
Each state has different estate laws, so a move to a different state definitely requires an estate plan to be revised, as some elements of the estate plan may become invalid. For example, in some states two witnesses are required to execute a last will, while in others one witness is sufficient. If you move from a one-witness state to a two-witness state, the possibility exists for your last will to be deemed invalid.
Any changes to the estate plan desired by the grantors, such as changed distribution of assets on death or a wish to name a different person to inherit, requires a revision.
Changes in the law, especially those regarding estate taxes, also make it necessary to update an estate plan. The general recommendation is to review the estate plan every three to five years, regardless of whether any trigger events have occurred.
Establishing a comprehensive estate plan, which includes a last will, health and financial powers of attorney and any necessary trusts, and maintaining it is the best way to ensure your wishes will be carried out in case of incapacity and death.
Reference: The Record-Courier (Jan. 28, 2023) “Estate plans require maintenance”
Suggested Key Terms: Estate Plan, Powers of Attorney, Will, Grantors, Assets, Inherit, Succession Plan, Tax Liabilities, Witness, Trigger Event, Beneficiary, Executor