Big Life Changes? Prepare for Big Estate Plan Changes

The COVID-19 pandemic demonstrates just how quickly and unexpectedly life can change. In addition to unanticipated upheavals that may occur, many choices we make also have significant impacts on our lives. There is a tendency of people who have created estate plans to let them run on autopilot rather than modifying them to reflect intended or unexpected life changes. This inattention to an estate plan can have serious consequences, including having assets go through probate or be inherited by an unintended beneficiary.

Events that Require Estate Plan Updates

An estate plan is structured to meet your needs at the time that it is created, but there is always an intent for it to be modified as your life changes. There are several decisions and events that will impact your plan, which include:

• If your estate plan was created before you were married, it is a fairly straightforward process to modify it to include your spouse. This process begins by updating your beneficiary and emergency contact information, and purchasing a life insurance policy. This is also a good time to consider drafting a will and a living will. Over time, you may want to include a revocable trust in your estate as well.
• Going through the divorce process can take an emotional toll and overwhelm both parties with legal complexities. As a result, modifying an estate plan to reflect the divorce may be forgotten and cause in unintended consequences such as a former spouse inheriting your property or receiving survival benefits on a life insurance policy. Avoid these situations by modifying your estate plan as soon as the divorces is finalized.
• Purchase or Refinance of a Home. Anytime you purchase or refinance real estate, you must ensure that this asset is titled appropriately with regard to your estate plan. This may include creating joint ownership, single ownership with rights of survivorship, or trust. Include your estate planning expert in this process to assure that it is consistent with the plan or so that the plan can be modified to include the new estate asset.
• Purchase of Life Insurance. Life insurance policies are a key component of all estate plans due to their versatility. These policies can be a source of liquidity, used to pay education expenses and provide financial security for your family. Inform your estate planning expert about the policy so that it can be incorporated into the overall plan, and be sure to keep the beneficiaries updated over time.
• Birth or Adoption of a Child/Children. Adding a new member to your family has a significant impact on your estate plan. In addition to inheritance issues, you will want to name a guardian for your child in the event that you died before he or she became an adult. Every time a child is born or adopted your estate plan must be changed to include your newest addition.
• Change in Work Benefits. Your work benefits could change due to a promotion or demotion, change from part time to full time employment or switching employers and/or careers. Any change in your work benefits can impact your assets and delay or accelerate your ability to achieve set goals. You may also find that you have too much or not enough life insurance and may need to make adjustments.
• Start or Change in Ownership of a Business. Ownership of a business has a significant impact on your estate plan. Depending on its structure, tax implications related to the business could have a negative impact on your heirs. If you start a new business or change the ownership structure of an existing business, you must work with your estate planning expert to assure that your loved ones receive the assets and benefits you intended after your death.
• Change in Residency.If you move from one state to another, your estate planning expert must review your plan to assure that it conforms to local laws, or make adjustments as needed. This process becomes more complicated if you move to a different country.
• Marriage, Divorce and Grandchildren. Your adult children may marry, have children of their own, and possibly divorce their spouses. When any of these events occur, ask your estate planning expert to review your plan to determine if there could be any ramifications due to these changes.
• Death of a Loved One. When someone mentioned in your estate plan passes away before you do, it is important to adjust your plan to assure that it continues to serve your needs and expectations. The loss of a named guardian to your children, a beneficiary or your life insurance or retirement account, estate executor and others can cause significant legal problems for others unless you adjust your plan accordingly.

While it is important to update and modify your estate plan when changes occur in your life, do not attempt to do this on your own. Only an expert estate planner understands all of the legal, financial and tax implications of changes and can work to create the best structure for your needs. At Life Counsel & Planning, we have helped clients create and update their estate plans for over 20 years. Whether you want to create an estate plan or update an existing one, please call us at (904) 638-2345 or go online to schedule a free consultation.