Estate Planning for Life Changes: How Life Can Influence Your Plan
Life changes fast. You can get married in what seems like a split second and divorced in a whirlwind of emotions. You could lose a loved one, or you could become a parent, have more children, buy property, or even inherit significant assets.
When life changes happen, your estate plan can help you protect yourself, your assets and loved ones by:
- Providing care and/or instructions for raising a child
- Creating a trust for a minor child or special needs child
- Adding a spouse or removing an ex-spouse from the estate plan
A life-altering event, whether good or bad, is a life change where an estate plan modification may be necessary. If you “set it and forget it,” you may be putting your plan and true wishes in jeopardy. The concept of estate planning for life changes is an important one to remember so you reach out for support on your estate plan, when you need it.
Why Isn’t Estate Planning a “Set It and Forget It” Process?
Estate plans are not a one-off plan that you create and never look at again. Your plan is based upon your life circumstances at the time you sign it, and we know life changes. So, too, must your plan so that it works for you and your life, and estate planning for life changes can make a difference.
Accidental, Unintentional or Unintended Disinheritance
If you have children, it is highly likely that you want to leave them an inheritance in your estate plan. You’ll often see problems with children inheriting when a remarriage happens. For example, let’s assume that you have a child named “Melanie” with your first spouse. You wish to give Melanie all your grandmother’s jewelry when you die, and your spouse agrees.
Fast forward 10 years and you’re now remarried. Your second spouse gets along with Melanie, but you title everything jointly. And, sadly, upon your death, your second spouse doesn’t agree that Melanie should receive the jewelry or that Melanie should receive anything.
Unless you made critical changes to your estate plan, an unintended disinheritance occurred. You didn’t intend the disinheritance but without a plan in place, Melanie receives nothing.
Your will may also provide for your ex. Fortunately, Washington state knows you do want that result, so treats your ex as having predeceased you. However, you forgot to change the beneficiary of your 401K account from your ex to the people you don’t want to inherit from you. This retirement account is the biggest asset in your estate. Who gets it? Your ex!
Other Reasons That You Can’t “Set It and Forget It” With an Estate Plan
While by no means exhaustive, the list below includes some of the main reasons that you need to review and update your estate plan regularly:
- A fiduciary is no longer able to manage your estate or no longer wishes to serve as the guardian for minor children or trustee of a trust
- Beneficiaries pass away or move out of the country
- Charities mentioned in your estate change names or dissolve
- You adopt a child, a child turns 18, a grandchild is born, or a new child is born
- You divorce
- Health changes happen to you or a beneficiary
- You move out of state and need to be sure that the documents you have are valid in the state, such as a will or advance medical directive
You may also simply change your mind and decide that the estate plan that you created no longer aligns with your wishes for your estate.
What Types of Life Changes Can Prompt Revisiting an Estate Plan?
Life changes warrant you revisiting your estate plan. Some of the major changes that should trigger a meeting with a lawyer to review your plan are:
Divorce
If you made your estate plan with an ex, it’s time to update your plan. Divorce is one of the times when an estate plan needs a major overhaul because you may need to change:
- Beneficiaries
- Trusts
- Powers of Attorney
Some states will even invalidate a lot of these designations for you, which may not be something that you want. Perhaps you still want your ex to continue to be a decision maker or receive certain assets; visit your lawyer for a full review of your estate plan. If you’re getting divorced, be sure to review and update your estate plan.
Death
While no one wants to think about the death of a loved one, the reality is that you may outlive some of the individuals named in your estate planning documents. For example, a beneficiary may pass away, or your named executor or health care agent may die.
In cases like these, it’s important to update your estate plan to fill any gaps created by the unfortunate loss.
Becoming a Parent or Having More Children
Welcoming a new child into the family is an exciting time, and it’s also a time to start thinking about how you can protect your child’s future. Now is the perfect time to update your estate plan, particularly your will.
Through your will, you can name an individual to serve as the guardian for your child if something should happen to you.
You can name one or multiple guardians who will handle:
- The day-to-day care of your child
- Financial decisions for your estate
Along with addressing guardianship issues, your estate plan can also be updated to establish trusts that will provide for minor children if you pass away.
Getting Married
Marriage is a joyful time that marks the start of a new life together. When two families join together as one, regardless of whether they have children, estate plans should be updated for newlyweds.
It’s easy to assume that your spouse will automatically inherit everything and have the power to make decisions on your behalf, but things aren’t always this straightforward. In fact, even though Washington is a community property state, the spouse has no legal right to manage the financial affairs of their spouse. A Durable Power of Attorney document is needed.
And, a well-thought-out estate plan will help ensure that your spouse is cared for after your death.
Through your will or a revocable trust, you can address asset direction. Beneficiary designations too should ensure alignment with your wishes.
For blended families and second or third marriages, it becomes even more important to revisit your estate plan.
- You may or may not want former spouses (or former family members by marriage) to inherit certain assets after your death.
- With blended families, outlining who gets what after death can help prevent disagreements and complications.
- Unintentional disinheritance to children can be avoided by use of a will with trusts.
Marriage is a significant life change and affects nearly every facet of your life. It makes sense to update your estate plan to reflect these changes.
Buying New Property
Whenever the value of your estate changes significantly, it’s time to revisit your estate plan to ensure it still offers the protection and benefits you want.
Whenever you purchase a new property, it raises the value of your estate, so this is a life event that warrants revisiting your plan.
You may consider updating your will or establishing a living trust to allow for a smooth transfer of your property to your beneficiaries after your death.
Moving to a New State
If you move to or buy property in a new state, updating your estate plan may not be at the top of your to-do list. However, estate and tax laws can vary from state to state. Your estate plan may need to be updated to address these issues or other state laws that may impact your estate.
If you purchase property in a different state from your primary residence, your estate plan will also need to be updated to outline how that property will be handled after your passing. Without a plan for your out-of-state property, your estate may need to be probated in multiple states.
How Do You Know If Your Life Change Requires a Need to Update Your Estate Plan?
As major life circumstances change, so should your estate plan. However, we understand that it’s not always easy to know which life changes warrant an estate plan revision.
ELG Estate Planning is here to help you understand estate planning for life changes. We can provide guidance on which documents need updating, if any, and when.
If you’re in the Spokane, Tri-Cities or Seattle area and need assistance with estate planning for life changes, contact us today to schedule a consultation.