10 Reasons Your Estate Plan Might Be Out Of Date

I was having a conversation with a couple of people the other day and we were talking about what our true missions are when it comes to our businesses.

When my turn came up I said “Look, at the end of the day everything is perfect if the client is making an informed decision about their estate plan. I don’t really care what they do specifically, as long as they understand all of the benefits and costs of their decisions. There is nothing worse than someone making an uninformed decision and paying the price for it later.”

That’s exactly the point of why I’m writing to you today — I want you to be aware of the hidden dangers out there when it comes to estate planning.

If any of these 10 situations applies to you, it’s time to consider revising (or creating) your estate plan.

1. Change in Marital Status

Did you know that your divorce doesn’t affect your estate planning documents in any way?

What about your beneficiary designations (life insurance, retirement accounts, investment accounts, etc.)?

If you don’t specifically change your plan and beneficiary designations, your ex-spouse is likely to get a very large chunk of your estate (to use any way they’d like).

Have kids? Would you rather have your ex-spouse controlling the money you leave them or someone else?

If divorce appears to be on the horizon for you or is already happening, you need to update your estate plan immediately.

But divorce isn’t the only reason to revisit your estate plan. If you are getting married it may be a good idea too. Prenuptial agreements can help to identify and secure the separate property of both spouses, which can be an important consideration when it comes to estate planning.

2. Change in Financial Status

This one seems pretty straight-forward, but there are some hidden income sources that are often overlooked for estate planning purposes.

Selling a business, receiving an inheritance, and retirement are all great reasons to take a fresh look at your estate plan and make sure your current plan is still meeting your needs.

3. Birth or Death

The birth of a child or grandchild may require the creation of a new trust or a reshuffling of assets to meet your needs and goals.

The death of a beneficiary or family member may require changes to your beneficiary designations, the terms of your will or trust, or your appointed powers of attorney.

4. Changes in Lives of Beneficiaries or Fiduciaries

Just as each of us is evolving and growing as a person over time, so too are the people that we’ve included in our estate plan.

And sometimes those changes outgrow our comfort level with their being a responsible party of your estate.

Here are just a couple of things to think about:
 Has someone developed bad habits (drugs, gambling, etc.)?
 Has someone gotten married or divorced? Had kids?
 Has someone matured to a point they would be a good candidate to serve a role in your estate (child or grandchild)?
 Has someone become too old to serve (parents, siblings, friends)?
 Has a close friend become less close over time?
 There is a reason we touch base with our clients every year to review their estate plan. These changes happen to everyone, and sometimes they necessitate a modification of the plan.

5. Changes in Location

If you move to another state you should consult a lawyer in that state to review your estate plan (every state has different rules).

If you purchase or come to own real estate in a different state you’ll want to talk to me (you want to protect your wealth from liability and make transferring the property in the future easy).

6. Changes in the Law

You are already protected in some respects from this problem by having a relationship with me and reading these emails every week.

Estate planning laws are in a state of constant movement. As the government continues to look for new sources of revenue, they tweak estate planning laws to do everything they can to take a little bit more.

We do our best to keep the government at bay.

7. Innovations in Estate Planning Approaches

When I’m not busy actually working on your estate plan and making sure I have relationships with the best essential team members in the business (financial planner, accountant, etc.) I’m continuing to increase my expertise and arsenal of estate planning options.

Just as with changes in the law, I’ll be sure to talk about those changes here, and make sure to let you know specifically about anything that might be beneficial for you individually.

8. Increased Asset Protection

You may not know this, but most personal injury attorneys out there have a search engine, similar to Google, that will pull up all of the assets an individual owns, including real estate, retirement accounts, investment accounts, bank accounts, etc.

If you are ever involved in an accident of any kind and injuries to someone else results, these attorneys will be searching their database for your assets.

There are strategies you can employ to make it more difficult for those type of people to associate your assets with you (trusts) and to completely eliminate any opportunity to access assets if you are found to be liable for some accident.

As you begin to accumulate more and more wealth employing these strategies will become more and more important to your peace of mind.

9. Innovations in Investment Tools and Strategies

Did you know that it is possible to purchase a life insurance policy, place it into an irrevocable trust, and still have access to the funds placed inside of the trust if they were ever needed (now all of you with some expertise out there, the way this would work is the trustee would make a loan to the grantor of some of the assets within the trust)?

This and many other tools and strategies exist to give people a lot of flexibility when it comes to estate strategies to maximize transferred wealth and minimize estate taxes.

10. Windows of Opportunity in Economic Cycles

A word of caution, here. This one gets a little technical.

Certain estate planning vehicles (grantor retained annuity trusts and qualified personal residence trusts as examples) are more attractive depending on the interest rates used to calculate the final tax and valuation determinations of your assets.

Some vehicles are better when interest rates are higher. Some are better when interest rates are lower.

You specifically knowing the ins and outs of these strategies isn’t necessary, but having someone there to let you know when favorable conditions exist is certainly a good place to be.
 Knowledge is Power
 At the end of the day these things shouldn’t necessarily be at the top of your mind every day.

But these topics should be revisited every year or so to make sure your plan continues to meet your goals and needs.

Remember, estate planning isn’t just about distributing your stuff. Your estate plan should be a vehicle that helps you live a “rich” life now, creates a “rich” life for future generations, and keeps your wealth in the family.


Originally published at cmslawfirm.com on August 16, 2016.