Getting your estate plan set up was a wise and responsible choice. Your estate plan gives you the peace of mind you need knowing that your loved ones will be protected if you pass away.
One common mistake people make once their estate plan is in place is forgetting to update or modify it when necessary. Although sometimes changes may not be necessary, they usually are.
There are many different life events that could cause modification to an estate plan to become required. The modifications might include updating your will, changing your power of attorney designation or switching your beneficiaries for certain assets or accounts.
Major life events
Your estate plan should typically be updated when the following life events occur:
- Birth of a new child or grandchild
- Marriage or divorce
- Purchase of a large asset such as a home
Updating your estate plan is especially important after a divorce. With the many steps and emotions involved in the Florida divorce process, your estate plan is probably the last thing on your mind.
However, an estate plan that lists a former spouse as the beneficiary of all your assets is often a recipe for disaster and leads to major conflict.
Deaths are also a life event that often triggers an update to an estate plan. The death of someone you appointed as a guardian for your children or a beneficiary means you must appoint someone else to that role.
Receiving a large inheritance or a gift is often a pleasant surprise. If this happens, remember that this is now another asset that must be passed down to someone if you pass away.
Minor life events that still require modification
Updating your estate plan is also a good idea when more minor life events occur. A change in your overall financial situation, career changes or taking on additional debt are all situations where you might benefit from modifying your estate plan to reflect these changes.
Sometimes modifying your estate plan is a good idea even when the events have nothing to do with you or your loved ones. Changes in the federal tax or state tax codes or investment laws could significantly impact your estate plan. Keep up to date with the latest laws to see if they affect your estate plan.
Regular review is still essential
Even without any of these events, it is generally a good idea to review your estate plan every three to five years. You may find that you have different preferences than you did when you set up the plan and decide it is time for a change.
When you do decide to modify your estate plan, it is best to have professional help. There are certain requirements that must be met to properly update an estate plan.
Failing to meet one of these requirements or missing a step could mean your updated estate plan is void and your former plan still controls. This increases the chance of your will being contested or other estate litigation which is what you likely wanted to avoid by setting up an estate plan.