Natalia Vander Laan
It is a common misconception that once the estate plan is prepared and executed, it does not require any further attention. Consequently, after the grantor’s death, the trustees oftentimes face a difficult task of administering the estate that is disorganized and incomplete. At best, the person in charge of the estate must commit additional time and resources to organize the estate. At worst, one’s wishes and desired distributions are not followed.
The beginning of a new year is an excellent time to review one’s estate plan.
One of the main reasons triggering the need to review the estate plan are major life events. Marriage or birth may lead to the need to add new beneficiaries. Conversely, a death of a beneficiary, a divorce of the grantor or a beneficiary, or even changed personal relationships might require updates to the estate plan to remove no-longer-desired beneficiaries.
Once marriage or divorce are finalized, it is important to review the existing estate planning documents and update them accordingly. The existing trust, will, powers of attorney, healthcare directives, and beneficiary designations should be reviewed and reconsidered as they relate to the new spouse or the ex-spouse. This may involve modifying beneficiaries, appointing new trustees, or adjusting distribution provisions to reflect the new circumstances. Oftentimes, divorce automatically revokes the ex-spouse as a fiduciary, but it is crucial to confirm this and designate new beneficiaries.
The illness, disability, or retirement of the grantor, or sometimes even that of a beneficiary, may warrant new special provisions in the estate plan to assist those who might require long-term care or will be receiving benefits over time.
Additionally, a revision of the estate plan is often warranted when there is a change in one’s assets, such as new acquisitions, sale of an asset, or the formation or modification of a business entity. Moreover, a growing estate might call for a revised estate plan focusing on minimizing estate taxes. On the other hand, if the estate decreased significantly, an existing estate plan focusing on tax planning can be revised, and often simplified. And finally, as the assets within the estate change, the property list should be updated, and it is necessary to confirm that all newly acquired assets are properly in the name of the trust to avoid probate.
Furthermore, as each state has different laws, a state-to-state move can also result in a need for revisions in one’s estate plan. Some elements of the estate plan might not be effective in another state. Similarly, a new state might offer legal solutions and documents previously not available. It is oftentimes more convenient and financially beneficial for the grantors as well as the trustees and beneficiaries to administer and interpret the trust under the laws of the current state of residence rather than under the laws of the state where the grantors previously resided.
Lastly, in addition to outside factors, any changes desired by the grantors, such as changed distributions or designation of fiduciaries, will require revisions to the estate plan.
Sometimes even the mere passage of time is a sufficient reason to review one’s estate plan. It is recommended to review the estate plan every three to five years. Even small changes in applicable law can have a significant impact on the validity of the estate plan.
Establishing a comprehensive estate plan, including a trust, will, powers of attorney, and healthcare directives, is a major step toward ensuring that one’s wishes are carried out during their incapacity and after their death. Reviewing and updating one’s estate plan is crucial in ensuring that a person’s current intentions will be carried out.
Natalia Vander Laan is a Minden attorney.
